What's new?

With the 2025–2026 tax year coming to an end, HMRC has released the new 2026–2027 legislation updates. Below are all the items that Paycircle has implemented to stay compliant for the new tax year.

Statutory Sick Pay (SSP) changes

The government's employment rights bill introduces significant changes to SSP, effective 6 April 2026. Paycircle has been updated to ensure full compliance with the new rules.

Key changes

SSP from day one.
Removal of the Lower Earnings Limit (LEL).
New standard weekly rate, the lower of 80% of AWE or £123.25.
Transitional rules for employees already receiving SSP in 2025–26 whose absence continues unbroken into 2026–27, transitional rules apply.

See the statutory sick pay changes for more information.

Student loan plan 5

A new student loan plan 5 takes effect from 6 April 2026, applying to employees who began undergraduate courses from 2023 onward. Plan 5 deductions are calculated at 9% on earnings above £25,000 per annum.

Employee setup

Plan 5 can be applied to new and existing employee records, manually and via the employee import. For new employees, a plan 5 option is available within the employee starter questions. For existing employees, plan 5 can be assigned via the employee's tax settings.

HMRC notifications

Paycircle will recognise SL1 (start) and SL2 (stop) notices from HMRC for Plan 5, allowing these to be applied directly from HMRC in the same way as existing plan notices.

Rates and thresholds

Payroll legislation is updated annually, requiring software to be up to date to ensure the accurate processing of payroll data. The following changes have been applied:

PAYE parameters

Standard UK PAYE rates were confirmed as frozen for the tax year commencing 6th April 2026. Personal allowance remains at £12,570.
Welsh PAYE confirmed no changes and aligned with the rest of the UK.
Scottish PAYE bands have been updated:
- The starter rate has increased from £2,827 to £3,967.
- The basic rate has increased from £14,921 to £16,956.

NIC parameters

Employees' NIC rates remain unchanged. The Lower Earnings Limit (LEL) threshold increases from £125 to £129 per week. Employers' NIC rates and thresholds remain the same.

Student loan thresholds

Student Loan thresholds for Plan 1, Plan 2, and Scottish Student Loans have been updated for 2026–27.

Plan 1 repayment threshold increases to £26,900.
Plan 2 increases to £29,385.
Plan 4 (Scottish) increases to £33,795.

Parental pay parameters

The weekly rate of Statutory Parental Pay (SSP) increases to £194.32 for 2026–27.

Small employer's relief

Small employers who paid £45,000 or less in Class 1 NIC in the last complete tax year can reclaim 100% of statutory payments plus a compensation percentage from HMRC. All other employers can reclaim 92%.

From 6 April 2026, the compensation rate increases from 8.5% to 9%, meaning qualifying employers can reclaim a total of 109%.

Company car and van fuel benefit

The company car fuel benefit multiplier increases from £28,200 to £29,200.
Company car tax percentages increase by 1%.
The van benefit charge increases to £4,170.
The van fuel benefit charge increases to £798.

National minimum wage

National minimum wage rates have been updated for 2026–27:

Category	2025/26	2026/27
National Living Wage (21 and over)	£12.21	£12.71
18 to 20	£10.00	£10.85
Under 18	£7.55	£8.00
Apprentice	£7.55	£8.00
Accommodation (daily)	£10.66	£11.10
Accommodation (weekly)	£74.62	£77.70

P60 form updates

The P60 form has been updated for the 2026–27 tax year. Note that bereavement pay for Northern Ireland will update the existing Statutory Parental Bereavement Pay (SPBP) field.

Remove state aid options

State aid eligibility options have been removed from payroll settings, in line with HMRC removing this requirement for employment allowance claims.

RTI schema changes

Paycircle has been updated to support the HMRC RTI schema changes for 2026–27, ensuring compliance with the updated Full Payment Submission (FPS) and Employer Payment Summary (EPS) submission formats. P11D(b) schema changes are also included.