As part of the UK government's annual payroll updates, statutory family pay rates have been revised upward for the 2026/27 tax year. Employers must ensure their payroll systems are updated to calculate Maternity, Paternity, Shared Parental, Adoption, and Bereavement pay under the new limits. Operating these updates incorrectly can lead to payroll errors, employee dissatisfaction, and compliance reviews from HMRC.
What Are the New Rates for 2026?
From April 2026, the standard weekly rate for Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Shared Parental Pay (ShPP), Statutory Adoption Pay (SAP), and Statutory Parental Bereavement Pay (SPBP) rises to **£194.32** (or 90% of the employee's average weekly earnings, whichever is lower).
For Statutory Maternity Pay (SMP) and Statutory Adoption Pay (SAP), the structure remains as follows: - **First 6 weeks**: Paid at 90% of the employee's average weekly earnings (AWE) with no cap. - **Next 33 weeks**: Paid at the lower of the new statutory weekly rate of **£194.32** or 90% of AWE. - **Remaining 13 weeks**: Unpaid.
For Paternity Pay (SPP) and Shared Parental Pay (ShPP), the payment is the lower of **£194.32** per week or 90% of AWE for the entire duration of the leave. This means payroll managers must update their calculations to swap out the old rates and apply the new £194.32 threshold from day one of the new tax year. Integrating these statutory changes smoothly with your UK payroll management helps prevent manual calculation mistakes.
Employer Recovery of Statutory Payments
One important aspect for business cash flow is that employers can recover a portion of the statutory family pay they disburse to employees. The recovery rates depend on the size of the business based on their annual National Insurance contributions: - **Standard Recovery Rate**: Most employers can reclaim **92%** of the statutory payments made. - **Small Employers' Relief**: If your business qualifies for Small Employers' Relief (total Class 1 National Insurance was £45,000 or less in the relevant tax year), you can reclaim **100% plus an additional 3%** (totaling 103%) to offset the administrative burden.
To reclaim these payments, employers must calculate the recoverable amount during each payroll run and report it to HMRC on the Employer Payment Summary (EPS) sent via RTI. These adjustments must be reflected in the group accounts. Coordinating with experienced UK accounting services ensures that the reclaimed amounts are accounted for correctly in your general ledger.
Practical Steps for Payroll Managers
To ensure a seamless transition to the 2026/27 rates: 1. **Update Payroll Settings**: Verify that your payroll software provider has updated the statutory family pay rates to £194.32. 2. **Review Ongoing Leave**: For employees already on maternity or paternity leave that crosses into the new tax year, ensure the rate switch is applied automatically for payments made after the threshold change date. 3. **Double-Check Average Weekly Earnings (AWE)**: AWE calculations are based on the employee's earnings during a specific 8-week "relevant period" before the qualifying week. Ensure salary sacrifices or irregular bonuses paid during this period are treated correctly. 4. **Communicate Clearly**: Keep employees informed of how the rate changes affect their net pay during their leave periods.
Payline Worldwide's payroll specialists manage end-to-end statutory calculations, recovery submissions, and compliance updates for UK operations. Contact our team to review your family leave policies and payroll readiness for the new tax year.