Key takeaways

  • The National Living Wage rises 3.9% to £13.21 an hour from 1 April 2027. The 18 to 20 rate is £11.27, and the 16 to 17 and apprentice rates are £8.31.
  • Employer NICs stay at 15% above the £96 a week secondary threshold, and the Employment Allowance stays at £10,500.
  • The lower earnings limit rises to £133 a week. Other NICs thresholds and the income tax thresholds stay frozen, NICs until 2030-31.
  • Cars, vans, fuel and medical benefits must be payrolled from April 2027, and mileage rates rise above 10,000 miles.
  • A new parental allowance for self-employed fathers, partners and adopters starts in April 2029.

Budget 2026 leaves the main payroll tax rates alone but sets the 2027-28 numbers employers and payroll bureaux need, and confirms several administrative changes. The National Living Wage goes up 3.9%, employer National Insurance stays at 15% with the same thresholds, and benefits in kind start moving into payroll. Here is what changes and when.

Minimum wage rates from 1 April 2027

The government has accepted the Low Pay Commission’s recommendations:

RateFrom 1 April 2027Increase
National Living Wage (21 and over)£13.2150p (3.9%)
18 to 20 year old rate£11.2742p (3.9%)
16 to 17 year old rate£8.3131p (3.9%)
Apprentice rate£8.3131p (3.9%)

The Treasury says the National Living Wage increase is worth £910 a year in gross pay to a full-time worker. Our guide to the national minimum wage covers the current rates.

National Insurance for 2027-28

Annex A sets the weekly limits and thresholds:

Class 12026-272027-28
Lower earnings limit£129£133
Primary threshold£242£242
Secondary threshold£96£96
Upper earnings limit£967£967
Employee rate (primary threshold to UEL / above UEL)8% / 2%8% / 2%
Employer rate above secondary threshold15%15%
Employment Allowance£10,500£10,500

The upper secondary thresholds for under 21s, apprentices under 25 and veterans stay at £967 a week, and the freeport and investment zone thresholds at £481. The lower earnings limit and the Class 2 small profits threshold rise with September 2026 CPI of 3.5%. The overview of tax legislation says the remaining limits and thresholds stay at 2026-27 levels until 2030-31.

Income tax thresholds are also unchanged for 2027-28: the personal allowance is £12,570, the basic rate band £37,700 and the additional rate threshold £125,140.

Changes to how payroll works

  • Payrolling benefits in kind. From 6 April 2027 company cars, car fuel, vans, van fuel and medical benefits must be reported and taxed through payroll, with most other benefits following from 6 April 2028. See payrolling benefits in kind.
  • Mileage. The tax-free rate stays at 55p a mile for the first 10,000 business miles and rises from 25p to 35p above that from 6 April 2027, with the same rates for the National Insurance disregard. See mileage rates.
  • Subsistence. New benchmark scale rates of £20, £60 and £75 apply from April 2028. See employee expenses.
  • Direct Debit for PAYE. From April 2029 employers must have a Direct Debit in place to collect any PAYE liability unpaid at the due date. See Direct Debit for VAT and PAYE.

Smaller payroll measures

  • Immigration fees. An employer’s payment of the Immigration Skills Charge or a certificate of sponsorship fee will not be a taxable benefit, for payments made on or after 28 October 2026.
  • Cancelled shifts. Statutory payments for cancelled, moved or curtailed shifts are already taxable as employment income. From 6 April 2027 the legislation will also cover such payments to agency workers.
  • Image rights. The rule treating employment-related image rights payments as employment income, subject to income tax and NICs, is delayed by a year to 6 April 2028.

Parental pay and carers

The Budget document confirms that from April 2029 eligible self-employed fathers, partners and adopters in Great Britain, who are currently excluded, will be able to get parental pay through a new parental allowance. It will also help people who do not qualify for statutory paternity or adoption pay because they are recently employed or have irregular work, provided they have enough work and earnings history. The government expects over 150,000 parents a year to benefit.

For carers, the cliff edge in Carer’s Allowance is being replaced by a taper on earnings above the weekly earnings limit, planned for 2030-31 in England and Wales. Employees who are carers will no longer lose the whole benefit for earning slightly more than the limit.

What it means for payroll bureaux and practices

Load the 2027-28 rates early. Minimum wage, NICs limits and mileage rates all change on 6 April or 1 April 2027. Check clients’ hourly rates, salary sacrifice arrangements and apprentice pay against the new minimums.

Budget for frozen thresholds. With the secondary threshold held at £96 a week and the employer rate at 15%, pay rises feed straight into employer NICs. Our guide to employer’s NICs and the employer NI calculator can help.

Prepare for benefits payrolling. This is the largest operational change for 2027. Voluntary registration reopens on 5 November 2026.

Frequently asked questions

What is the National Living Wage from April 2027?

£13.21 an hour for workers aged 21 and over, from 1 April 2027, a 3.9% increase.

Is employer National Insurance changing in 2027-28?

No. The employer rate stays at 15% above the secondary threshold of £96 a week, and the Employment Allowance stays at £10,500.

What is the lower earnings limit for 2027-28?

£133 a week, or £6,916 a year, up from £129 a week, in line with September 2026 CPI.

When can self-employed fathers get paternity pay?

The Budget document says a new parental allowance for eligible self-employed fathers, partners and adopters in Great Britain will start from April 2029.

Sources

Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance on 28 October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.