John Healey delivered his first Budget as Chancellor yesterday and promised "breathing space" and no rises to income tax, employee National Insurance or VAT.
Budget day is often dominated by the big numbers; wage increases, tax changes, measures designed to ease pressure on households and businesses. But payroll professionals know that this is only the beginning.
Now comes the part that matters to payroll; turning policy into accurate pay, compliant processes and informed decisions.
Behind every employment related change sit practical questions about eligibility, effective dates, payroll configuration, employee communications, employer budgeting and compliance. Get all those right and the changes can be managed smoothly. Get them wrong, and the consequences can mean incorrect payments, avoidable employee queries, and numerous corrections.
The Autumn Budget delivered yesterday, 28th October 2026 offers a timely reminder of payrolls role in translating Government policy into the everyday reality of working life.
Here we will delve further into the developments that deserve attention from a payroll perspective and ask the questions:
What does this mean for your organisation? Your daily responsibilities? And the payroll team that is supporting them?
New Minimum Wage rates
One of the clearest announcements for payroll is the 3.9% increase in National Minimum Wage and National Living Wage from April 2027.
For workers aged 21 and over this rise to £13.21 an hour, and the rate for 18- to 20-year-olds rises to £11.27 means that despite previous announcements, the gap between younger and older workers hasn't started to narrow.
From an annual wage perspective, the increase represents an approximate £910 additional gross earnings based on a 35-hour week over 52 weeks per year.
For payroll teams, however, the headline calculation is only the starting point.
The questions you need to be asking are:
Have we identified every employee whose pay will fall below the new minimum?
Are any age and apprenticeship eligibility being monitored correctly?
Could overtime, unpaid working time, or salary sacrifice deductions affect minimum wage compliance?
Are our payroll systems and approval processes ready ahead of April?
New rates need to be in your system for the first pay reference period starting on or after 1 April, and anyone paid close to the minimum needs checking, especially if salary sacrifice could take them below the new floor. Get it wrong and it can become very public, as we covered in How to Avoid a HMRC Name and Shame.
Mileage: 55p Is Here to Stay, 35p on the Way!
This was the most practical announcement of the day for payroll. The 55p tax-free rate for the first 10,000 business miles, brought in this year as a temporary measure and backdated to 6 April 2026, is now permanent. And for every business mile over 10,000, the rate rises from 25p to 35p, its first change since 2001.
The government expects around three million people to benefit, from care workers and community nurses to engineers and field teams.
For payroll professionals, this is an opportunity to review the entire expenses process rather than just amend a rate in the system.
Does the expenses policy reflect the correct rates and the effective dates?
Are employees and managers clear about eligible business mileage?
Are claims being recorded accurately, including the distinction between business and ordinary commuting?
Does payroll software, finance records and expense systems use consistent information?
Are payments above the approved mileage allowance being handled correctly for tax purposes?
The distinction between a reimbursement rate and the tax treatment of a payment matters. The reinstated rates do not automatically mean every employer must reimburse mileage at those amounts.
If you're not sure your mileage process would stand up to scrutiny, that's exactly what our Assessments are for.
'Benefits in Kind' Move Into Payroll
Although not highlighted in the Chancellor’s speech, an equally significant change arrives in the same month. From 6 April 2027, payrolling benefits in kind becomes mandatory. This means items such as company cars, private medical insurance and other taxable benefits will be processed through payroll each month rather than reported annually on a P11D.
For many organisations, this shift represents a fundamental change in how benefits are administered, taxed and communicated. If preparation hasn’t yet begun, now is the moment to start.
If you haven't started preparing, our guide to Mandatory Payrolling of Benefits in Kind is a good place to begin.
Pay Transparency Is on Its Way
Of all the developments surrounding this year's Budget, pay transparency deserves closer attention from the payroll profession.
Why? Because transparency changes the questions employers need to answer about pay, which subsequentially means the payroll data will be central to finding those answers.
The Chancellor said the government has heard the calls for pay transparency on job adverts and will "act soon" to make sure women are paid and promoted fairly. There's no details or date yet, but the direction seems clear.
Conversations are moving beyond simply asking whether employees are paid correctly. It is increasingly about how salaries are set, how differences are justified, and whether people understand the decisions that affect their earnings.
As payroll holds the data, this will run on, you need to be asking: Are our grades consistent? Can we explain every pay difference? Is that data properly protected? We looked at payroll's growing role in fairness in The Shift Towards Inclusive Payroll, and our Cyber & Data Security team can help make sure sensitive pay data is handled securely.
HMRC Is Getting Firmer
HMRC is getting extra funding to improve compliance, plus stronger powers to collect overdue tax from those who can clearly afford to pay but ignore repeated contact. It's aimed at tax debt rather than payroll errors. More resources are going into making sure tax is paid on time. It's a good prompt to check your records and submissions are ready to be looked at and The Payroll Audit Survival Guide walks through what to have in place.
What Didn't Change?
Some of the most important news for payroll is what wasn't said:
Tax thresholds: Income tax and National Insurance thresholds stay frozen until April 2031, so pay rises keep pulling more income into tax.
Employer National Insurance: No change, so it stays at 15% on earnings above £5,000.
Student loans: Nothing on Plan 2 repayment thresholds, so deductions carry on as they are.
Inflation: The OBR now expects inflation to stay above 3% next year, so a 3.9% minimum wage rise is only just ahead of prices.
Put together, many employees will get a pay rise and still feel worse off, and payroll is usually where those questions land first. One you can answer quickly: the new £100 Household Energy Payment for households in council tax bands A to D in England goes straight into bank accounts, not through payroll. For ideas on supporting people beyond the payslip, see The Growing Importance of Employee Financial Wellbeing Programmes.
What to Do Now
Diary the April 2027 changes: minimum wage, benefits in kind and mileage.
Check who's close to the new minimum wage, including anyone in salary sacrifice.
Review your mileage process: 55p, earlier top-ups and room for a 35p band.
Look at your pay data with transparency in mind.
Prepare your messages to employees on take-home pay and the energy payment.
Watch for HMRC's detail, including the 35p start date and, if you run a pensioner payroll, how the new Pension Tax Allowance will work.
How We Can Help
April 2027 is going to ask a lot of payroll teams, and it arrives alongside year-end. But payroll should never be stressful; it should just flow. Whether you need a health check before the changes land, advice on getting your systems and policies ready, or someone to run your payroll for you, The Leppington Group can help.
Get in touch and let's make sure your April is busy for the right reasons.
Why You Should Contact Us
The Leppington Group Limited (TLG) is a UK headquartered company specialising in payroll advisory, audit and consulting services.
Originally founded in 2011, TLG has established itself as a reputable, independent and trusted partner for organisations seeking expert guidance for any aspect of payroll requirements.
TLG's core services include payroll audit & health checks, issue navigation, procurement, vendor selection, implementation guidance, project mediation, payroll administration, and cyber & privacy services.
TLG's commitment to excellence, and a customer-centric approach, has elevated the organisation as a valuable resource for businesses seeking to optimise their payroll processes without the ‘Big Four’ price tag.
TLG exists to make payroll simpler, businesses better and results clearer.
