UK Payroll Compliance for Employers: 2026/27

What Businesses Need to Know

Payroll compliance remains one of the most important responsibilities for UK employers. With HMRC continuing to focus on Real Time Information (RTI) reporting, changes to Statutory Sick Pay (SSP), National Minimum Wage increases, and ongoing scrutiny of benefits and expenses, the 2026/27 tax year presents several areas that employers cannot afford to overlook.

Why Payroll Compliance Matters

Payroll is far more than simply paying employees on time. Employers are responsible for:

• Operating PAYE correctly
• Deducting and reporting Income Tax and National Insurance Contributions (NICs)
• Making accurate RTI submissions
• Administering statutory payments
• Meeting workplace pension obligations
• Reporting taxable benefits and expenses
• Maintaining payroll records for HMRC inspection

HMRC expects employers to keep accurate payroll records and provide them when requested. Failure to comply can result in penalties, interest charges, compliance checks, and reputational damage.

Real Time Information (RTI) Remains Critical

RTI continues to be the main focus of PAYE compliance. Employers must submit a Full Payment Submission (FPS) to HMRC on or before the date employees are paid. Where adjustments are required, an Employer Payment Summary (EPS) may also need to be submitted.

Common RTI errors include:

• Late FPS submissions
• Incorrect National Insurance numbers
• Incorrect tax codes
• Missing starter information
• Inaccurate year-to-date values

Employers should ensure payroll software is fully updated for the 2026/27 tax year and that payroll processes are reviewed regularly to minimise filing errors.

PAYE and National Insurance Responsibilities

Employers remain responsible for:

• Calculating tax deductions correctly
• Deducting employee NICs
• Calculating employer NICs
• Paying liabilities to HMRC by the relevant deadlines

HMRC’s guidance for 2026/27 continues to emphasise record keeping and accurate calculation of PAYE and NIC liabilities. Employers must retain payroll records and evidence supporting calculations.

Businesses should pay particular attention to:

• Directors’ NIC calculations
• Seasonal and irregular workers
• Termination payments
• Salary sacrifice arrangements
• Employment status assessments

Employment status remains an area of significant HMRC attention, particularly where workers may incorrectly be treated as self-employed.

National Minimum Wage Increases

From 1 April 2026, the National Minimum Wage and National Living Wage rates increased as follows:

Minimum wage compliance remains one of HMRC’s key enforcement priorities.

Employers should review:

• Salary sacrifice arrangements
• Accommodation deductions
• Uniform and equipment costs
• Time recording systems
• Apprentice pay calculations

Even unintentional breaches can lead to arrears, penalties, and public naming by HMRC.

Significant Changes to Statutory Sick Pay

One of the biggest payroll developments for 2026/27 is the reform of Statutory Sick Pay under the Employment Rights Act.

From 6 April 2026:

• SSP is payable from the first day of sickness absence.
• The previous three waiting days have been removed.
• The Lower Earnings Limit requirement has been removed.
• More employees are now eligible for SSP.
• SSP is paid at 80% of average weekly earnings or the statutory weekly rate, whichever is lower.

These changes significantly increase payroll administration requirements. Failure to update payroll software could lead to incorrect SSP calculations and compliance issues.

Workplace Pension Compliance

Automatic enrolment remains a major compliance obligation.

Employers must:

• Assess workers every pay period
• Enrol eligible employees
• Make minimum employer contributions
• Provide required communications
• Complete re-enrolment duties where necessary

The Pensions Regulator continues to issue penalties to employers who fail to meet their obligations. Pension compliance should therefore form part of every payroll review process.

Benefits and Expenses Reporting

Employers must ensure that taxable benefits are correctly reported.

Key areas include:

• Company cars and fuel
• Private medical insurance
• Living accommodation
• Interest-free loans
• Gym memberships
• Mobile phones exceeding exemptions

Employers may choose to payroll benefits rather than submit annual P11Ds. However, payrolling benefits requires accurate setup and ongoing monitoring to ensure the correct tax is collected throughout the year. For many employers, 2026/27 provides an opportunity to review whether payrolling benefits could reduce administration and improve employee understanding of their tax position.

Record Keeping Requirements

HMRC requires employers to maintain payroll records that support all calculations and submissions. These records must be available if HMRC conducts a compliance review.

Records typically include:

• Employee details
• Payroll reports
• FPS and EPS submissions
• PAYE payment records
• SSP records
• Pension contribution records
• Benefits and expenses information

Good record keeping is often the strongest defence during an HMRC enquiry.

Preparing for Compliance Reviews

An increasing number of employers are implementing internal payroll health checks.

Areas to review include:

Data Accuracy

• Tax codes
• Employee addresses
• National Insurance numbers
• Student loan indicators

Payroll Processes

• RTI submission timings
• SSP calculations
• Pension deductions
• Leaver processing

Benefits

• Benefit classifications
• P11D requirements
• Payrolling arrangements

Employment Status

• Contractors
• Casual workers
• Seasonal employees
• Directors

Regular reviews can identify issues before HMRC does.

Payroll compliance in 2026/27 is about more than meeting monthly deadlines. Employers must navigate significant SSP reforms, increased minimum wage rates, evolving employment legislation, pension obligations, and continued HMRC scrutiny of PAYE reporting. The most successful employers will be those who take a proactive approach by reviewing payroll processes, maintaining accurate records, investing in compliant payroll systems, and regularly assessing compliance risks. A robust payroll compliance framework not only protects businesses from penalties but also helps build trust with employees by ensuring they are paid accurately, taxed correctly, and receive the statutory entitlements to which they are entitled.

Get In Touch

Our team of experienced payroll experts can guide you through your compliance obligations, or if you think outsourcing your payroll to us would save you the additional work, please contact your local office to arrange a quote.