17 Feb Payroll Changes From April 2026: What Small Businesses Must Do Now (SSP, Student Loans & More)
If you run a small business with employees, you'll want to pay attention to this one. April 2026 is bringing some pretty significant payroll changes that could affect your bottom line, your processes, and your legal obligations. We're talking new Statutory Sick Pay rules, minimum wage increases, National Insurance adjustments, and student loan threshold changes.
The good news? None of this is insurmountable. With a bit of prep now, you can get ahead of the game and avoid any nasty surprises come April. Let's break down what's changing and what you need to do.
Statutory Sick Pay Gets a Major Overhaul
This is the big one. From April 6, 2026, Statutory Sick Pay (SSP) is getting a complete shake-up, and it's actually great news for employees: but it does mean more admin and cost for employers.
First up, SSP becomes a day-one right. Gone is the three-day waiting period where employees had to be off sick before they qualified for SSP. Now, if someone's off sick on day one, they're entitled to SSP from that very first day.
Secondly, the lower earnings limit is being scrapped. Previously, employees had to earn at least £123 per week to qualify for SSP. Not anymore. Every employee, regardless of how much they earn, will now be entitled to SSP when they're off sick.
And finally, the weekly rate itself is increasing to £123.25 (or 80% of their average weekly earnings if that's lower). For context, that's up from £116.75 in 2025.
What does this mean for you?
Your sick pay bill is likely going up, especially if you employ part-time or lower-paid staff who previously wouldn't have qualified. You'll also need to update your sickness policies and employee handbooks to reflect these changes. Make sure your payroll software is configured correctly: or better yet, chat to your small business accountant about how to handle it smoothly.
Minimum Wage Increases Across the Board
April 1, 2026 sees another round of National Minimum Wage increases. Here's the breakdown:
- Ages 21 and over: £12.21 → £12.71 per hour
- Ages 18-20: £10.00 → £10.85 per hour
- Under 18 and apprentices: £7.55 → £8.00 per hour
These increases are mandatory, and failure to comply is a criminal offence: not something you want on your record. If you've got employees on or near minimum wage, you need to review their contracts now and budget for the increase.
Don't forget about salary sacrifice arrangements either. If you offer things like pension contributions or cycle-to-work schemes through salary sacrifice, make sure the deductions don't push anyone's pay below the minimum wage threshold. That's a common trip-up.
National Insurance and the Employment Allowance Lifeline
Let's be honest: employer National Insurance contributions have been a bit of a headache lately. The secondary NI threshold dropped to £5,000 per year back in April 2025, which meant employers started paying NI on a much larger chunk of their employees' earnings.
That change is still biting in 2026, so if you haven't already adjusted your budgets, now's the time. However, there is a silver lining: the Employment Allowance has increased to £10,500. This is a tax relief that allows eligible businesses to reduce their employer NI bill.
If you're a small Ltd company with a relatively modest payroll, this allowance could wipe out a significant portion: or even all: of your NI liability. Make sure you're claiming it if you're eligible. It's one of those things that's easy to overlook but can make a real difference to your cash flow.
Student Loan Repayment Threshold Changes
Student loan repayments are processed through payroll, and the thresholds change annually. From April 2026, employees on Plan 1, Plan 2, Plan 4, and Postgraduate Loans will see adjustments to their repayment thresholds.
While the exact figures are typically announced closer to the date, employers need to be ready to update their payroll systems to reflect the new thresholds. Get it wrong, and you could be over or under-deducting from employees' pay: neither of which is a good look.
If you're using a Xero accountant or cloud-based payroll software, these updates should be pushed through automatically, but it's always worth double-checking that everything's ticking over correctly.
Statutory Leave Rates Are Going Up Too
It's not just sick pay that's changing. From April 6, 2026, the rates for various types of statutory family leave are increasing from £187.18 to £194.32 per week.
This affects:
- Statutory maternity pay
- Statutory paternity pay
- Statutory adoption pay
- Shared parental leave pay
- Neonatal care pay
- Parental bereavement leave pay
If you've got employees taking any of these types of leave in the new tax year, make sure your payroll is set up to pay the correct rates. Again, this is where having your payroll sorted by a professional payroll bureau can save you time and stress.
Union Recognition Rules Are Changing
This one's a bit more niche, but worth knowing about. From April 6, 2026, the government has simplified union recognition procedures. The threshold for union recognition could be lowered to as little as 2% of the bargaining unit, making it easier for unions to gain recognition in workplaces.
For most small businesses, this won't be immediately relevant, but if you employ a larger workforce or operate in a unionised sector, it's something to keep on your radar.
So, What Should You Do Right Now?
Let's not sugarcoat it: there's quite a bit to juggle here. But breaking it down into bite-sized tasks makes it much more manageable:
1. Audit your employee contracts
Check that everyone's on the correct minimum wage rate (or above) and that salary sacrifice arrangements won't cause any issues.
2. Update your sickness policies
Rewrite your employee handbook to reflect the new day-one SSP rules and the removal of the lower earnings limit.
3. Review your payroll software settings
Whether you're using Xero, Sage, or something else, make sure it's configured to handle the SSP changes, student loan threshold updates, and statutory leave rate increases.
4. Budget for increased costs
Between higher wages, increased SSP, and employer NI contributions, your payroll costs are going up. Adjust your forecasts accordingly.
5. Check your Employment Allowance eligibility
If you're not already claiming it, find out if you qualify. It could save you thousands.
6. Get professional advice
Payroll compliance is complicated, and the penalties for getting it wrong can be steep. Whether you need a one-off review or ongoing support, it's worth speaking to someone who knows the ins and outs.
Let Us Take the Stress Out of Payroll
Look, payroll is one of those things that's absolutely essential but incredibly time-consuming: and the stakes are high. One mistake and you could face HMRC penalties, unhappy employees, or both.
That's where our payroll bureau service comes in. We handle the whole process for you, from calculating wages and deductions to submitting RTI returns and staying on top of all these regulatory changes. You focus on running your business; we'll make sure everyone gets paid correctly and on time.
We're also Xero Cloud Experts, so if you're already using Xero (or thinking about making the switch), we can integrate your payroll seamlessly with the rest of your accounting. Everything in one place, all working together beautifully.
Whether you're a small Ltd company with just a handful of employees or a growing business with more complex needs, we've got the expertise to keep you compliant and save you time. And honestly, with all these changes coming in April, there's never been a better time to get some professional support.
Don't Leave It Until the Last Minute
April 2026 might feel like it's ages away, but it'll be here before you know it. The businesses that start preparing now will sail through these changes. The ones that leave it until March will be scrambling.
If you'd like to chat about how these payroll changes might affect your business: or if you're interested in handing the whole thing over to our payroll bureau: just get in touch. We're always happy to talk through your options with no pressure or obligation.
Let's get your payroll sorted so you can focus on what you do best. ☕️
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