18/02/2026
ASK MARLENA
Payroll 2026: What Ireland and the UK Are Really Telling Your Payslip
New year, new rates — and in 2026, payroll teams in both Ireland and the UK have more than just routine updates to contend with. From pension auto-enrolment to minimum wage increases and continued fiscal drag, this year’s changes quietly reshape take-home pay, employer costs, and compliance obligations.
Let’s break it down.
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🇮🇪 Ireland: Small Rate Tweaks, Big Structural Change
1️⃣ USC Bands Shift (Again)
From 1 January 2026, the Revenue Commissioners applies updated Universal Social Charge (USC) bands:
• 0.5% up to €12,012
• 2% up to €28,700
• 3% up to €70,044
• 8% above €70,044
• No USC where income does not exceed €13,000
While headline rates remain familiar, the widened 2% band slightly eases pressure for middle earners. It’s a subtle adjustment — but one payroll systems must reflect accurately from the first January run.
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2️⃣ Income Tax: The Quiet Freeze
Income tax bands (20% / 40%) and core credits remain unchanged.
The effect? Fiscal drag continues. As salaries rise, more income edges into higher taxation without a formal rate increase. It’s not dramatic — but it’s persistent.
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3️⃣ Minimum Wage Increases
Ireland’s national minimum wage rises to €14.15 per hour from 1 January 2026.
For employers, this impacts:
• Base salary thresholds
• Overtime calculations
• PRSI and USC exposure
• Salary review budgets
For payroll teams, it means reviewing hourly rates and ensuring compliance across part-time and variable hour staff.
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4️⃣ PRSI: Incremental but Ongoing
Planned phased increases to PRSI continue in 2026, following earlier uplifts in 2025. Though modest, these adjustments increase employer costs and require payroll configuration updates to maintain compliance.
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5️⃣ The Big One: Auto-Enrolment Pensions Begin
Ireland’s long-anticipated automatic pension scheme launches 1 January 2026.
Eligible employees (aged 23–60 earning €20,000+) will be automatically enrolled in the new system administered by the National Automatic Enrolment Retirement Savings Authority.
Employers must:
• Register employees
• Deduct contributions
• Match contributions
• Manage opt-out windows
This is the most operationally significant Irish payroll change in years — and it’s not optional.
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🇬🇧 United Kingdom: Stability on the Surface, Pressure Underneath
The UK tax year 2026/27 begins on 6 April 2026 — and while there are no radical overhauls, the cumulative impact of frozen thresholds and rising employment costs continues.
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1️⃣ Income Tax & National Insurance Thresholds
Thresholds remain largely frozen under policies introduced by HM Treasury.
The result is familiar:
As wages increase, employees pay more tax — without headline rate changes.
For payroll professionals, this means accurate coding and National Insurance application remain critical, particularly for higher earners.
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2️⃣ National Living Wage Rises
From April 2026, the National Living Wage increases to £12.71 per hour for workers aged 21+.
Lower age bands also rise, requiring payroll teams to:
• Review age-based pay rates
• Monitor birthdays triggering rate changes
• Adjust salary sacrifice arrangements where relevant
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3️⃣ Statutory Sick Pay Reform
From 6 April 2026:
• SSP becomes payable from Day 1 (removal of waiting days)
• Weekly SSP rises to £123.25 or 80% of average weekly earnings (whichever is lower)
Administered under guidance from HM Revenue & Customs, this reform increases employer cost exposure and requires system rule updates.
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4️⃣ Mandatory Payrolling of Benefits (On the Horizon)
While full mandatory payrolling of Benefits-in-Kind begins in April 2027, 2026 is the preparation year.
Employers should begin transitioning to real-time reporting of benefits through payroll rather than relying solely on annual P11D submissions.
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What 2026 Really Means for Payroll Teams
Across both jurisdictions, the theme is clear:
No dramatic tax revolution — but increasing operational complexity.
• Ireland introduces structural pension reform.
• The UK deepens real-time payroll reporting.
• Both maintain threshold freezes that quietly increase tax burdens.
• Minimum wage growth raises employer costs.
For payroll professionals, 2026 is less about recalculating rates — and more about managing system readiness, compliance risk, and employee communication.
Because while employees notice what hits their bank account…
Payroll notices everything.
