News
Significant legislative changes to UK employment rights are set to start taking effect with gradual implementation between 2026 and 2027.
Below is a summary of the key changes:
Statutory sick pay from first full day of sickness
Two key features of statutory sick pay (SSP) are being removed under the Employment Rights Act:
- the Lower Earnings Limit, and
- the three-day waiting period which usually applies before SSP is paid.
From April 2026, SSP will be payable on the first full day of sickness, regardless of earnings.
Due to this change, where we process your payroll, it is important that you notify us as soon as you become aware of an employees absence due to sickness. The easiest way to do this will be by dropping an email to your usual contact.
Paternity and unpaid parental leave a day-one right
Employees will now be able to take paternity or unpaid parental leave from the first day of their employment, from April 2026.
Furthermore, fathers and partners will now be eligible to take additional parental leave, even if they have previously taken shared parental leave and pay.
Bereaved partner’s paternity leave a day one right
From 6 April, employees who lose the mother or primary adopter of their child within the first year of the child’s life will have the right to take time off work from the first day of their employment.
Although pay will be at the employer’s discretion, employees can be eligible for up to one year (52 weeks) of compassionate leave.
Enhanced redundancy protections
Businesses who fail to follow correct redundancy procedures will face tougher penalties.
From April of this year, employers who have not properly consulted suitable employee representatives as part of their legal obligations during 20 or more redundancies per establishment within a 90-day period, will need to pay each affected employee a maximum protective award of 180 days’ pay, instead of 90 days.
Further changes to redundancy thresholds will come into force during 2027.
Stronger whistleblowing protections following sexual harassment reports
Employees who report workplace sexual harassment will soon be entitled to stronger whistleblowing protections against unfair dismissal.
Previously, the claimant had to demonstrate that their whistleblowing disclosure fell within the scope of existing wrongdoing categories.
Those reporting workplace sexual harassment will therefore benefit from greater protections when the law comes into force from April of this year.
New agency to uphold key employment rights
A new government body, the Fair Worker Agency (FWA), which will enforce key employment rights will be introduced from April.
Consolidating information, support and guidance into one place and covering rights such as National Minimum Wage, sick pay and anti-slavery laws, the FWA will also have powers to investigate employment breaches and non-compliance as well as labour exploitation concerns.
It will work closely with HMRC, trade unions and independent representations. Employers requiring support and guidance on any employment rights issue should use the FWA website once it has launched.
Repeal of Trade Union Act 2016
A large proportion of the Trade Union Act 2016 will be repealed from 18 February. In its place, simplified measures have been introduced, while focusing on employee rights.
The key changes include:
- Unions will have 10 days (rather than 14) to inform employers of planned industrial action.
- Ballots approving industrial action will now have a 12-month mandate, not six.
- Employees taking part in industrial action will now be protected from unfair dismissal, regardless of the duration of the industrial action.
Preparing for the change
To ensure compliance you may need to consider revisiting your employment policies and update relevant documents and employee handbooks to ensure these are up-to-date with new legislation. If you are unsure, you should make contact your HR advisers.
Further information can be found on the UK Government website here https://www.business.gov.uk/campaign/employment-changes/
Following the publication of the UK tax and National Insurance thresholds for the 2026/27 tax year, we have reviewed the most tax-efficient remuneration strategy for directors from 6 April 2026.
Companies With One Director
For sole directors (i.e. where the company has only one director), the Employment Allowance cannot be claimed. This means the choice of salary level must balance tax-efficiency with National Insurance implications.
Recommended Optimum Salary for 2026/27
The recommended salary continues to be £12,570.
At this level:
- No income tax is due (equals the Personal Allowance)
- NI credits are secured
- Employer NI is payable, but the corporation tax saving exceeds the NI cost, producing a net tax saving.
Overall Net Tax Impact – 2026/27
The following table shows the Employer NI cost, Corporation Tax saving, and net position for a sole director taking the recommended salary of £12,570.
| Item | Calculation | Amount |
|---|---|---|
| Director salary | £12,570 | |
| Employer NI threshold | £5,000 | |
| NI-able pay | £12,570 − £5,000 | £7,570 |
| Employer NI at 15% | £7,570 × 15% | £1,135.50 |
| Corporation tax saving at 19% | £2,604.05 | |
| Net tax benefit | £2,604.05 − £1,135.50 | £1,468.55 |
A salary of £12,570 remains the most tax-efficient strategy for 2026/27, yielding an overall positive tax saving of £1,468.55.
Companies With Two or More Directors
Where a company has two or more directors, the Employment Allowance is available, so salaries of £12,570 remain optimal with no Employer NI due.
This advice is unchanged from 2025/26, as none of the rates or limits relating to employment has changed.
Things to bear in mind
There are some circumstances where the strategy above may not be right for you.
- You are a director but have income from another source outside of your limited company (i.e. rental income)
- How much tax you pay or save across the combination of your company and you personally is more important than what you personally take home in cash, and you can afford to sacrifice personal take-home pay for the benefit of the company tax position
- You are already drawing more cash than you need to fund your lifestyle
- You are planning on drawing between £100,000 and £125,000 of income from your company
- You have income of over £50,000 from other sources.
Dividends, salary and profit extraction
For the 2026/27 tax year, UK dividend tax rates will increase by 2% for basic rate and higher rate tax payers.
Dividends will now be taxed as follows:
- Dividend allowance – £500 – 0%
- Basic rate (up to £50,270 total income) -10.75%
- Higher rates (between £50,271-£125,140 total income) – 35.75%
- Additional rate (over £125,140 total income) – 39.35%
This means you should be aware that the cost of taking dividends from your company has increased. As a result, you can extract the same amount from your company as in previous years and this will result in a higher tax bill than previously seen.
Key 2026/27 Thresholds
- Secondary Threshold (Employer NI): £5,000 per year — unchanged for 2026/27
- Lower Earnings Limit (LEL): £6,708 per year — required to earn NI credits
- Personal Allowance: £12,570 per year — remains frozen
- Employer NI rate: 15% above the Secondary Threshold
Your personal position
Your personal tax position and any company profit available for extraction is unique. This is something we would review for you as part of our normal year end work.
Should you wish for us to carry out a detailed review of your personal scenario on how these changes may affect you in advance of 2026/27 and to discuss potential tax efficiencies you could adopt then do get in contact