From 6 April 2026, the State Pension age (SPA) will start increasing from 66 to 67 years old.
Although the increase will be phased in over the course of two years, it will have an immediate impact on your payroll and compliance requirements.
If your payroll systems are not ready, you risk making incorrect National Insurance (NI) deductions and that can quickly lead to reporting errors and HMRC enquiries.
What is changing to SPA?
The increase in SPA will be phased in between April 2026 and March 2028.
Individuals born between 6 April 1960 and 5 March 1961 will reach SPA at 66 years and a specified number of months.
The Government has published the specific dates in its State Pension age timetable.
As life expectancy has risen, the Government has gradually increased SPA.
Over the past 15 years, it has already moved from 60 to 65 for women and from 65 to 66 for both men and women.
It is crucial employers know that once an employee reaches SPA, they stop paying employee NI contributions.
However, you must still pay employer Class 1 NI contributions.
What does the SPA change mean for employers?
Employers must carefully monitor employees approaching SPA and ensure their NI deductions do not stop too early or continue for too long.
When an employee reaches SPA:
- Their NI category letter must change to ‘C’ in payroll systems
- Employee NI deductions must stop
- Employer NI contributions must continue
When the NI category changes due to employees reaching SPA, this is treated as a mid-year category letter change.
Payroll teams must continue reporting year-to-date figures under the original category letter separately until the end of the tax year.
Employers must also obtain proof of age from their employee to prove they have reached SPA. This can include:
- A passport
- A birth certificate
- An existing CA4140 certificate of age exception (although new certificates are no longer issued)
Failure to apply these changes correctly could result in incorrect deductions and compliance issues.
How can you prepare your payroll for the SPA increase?
Employers should not be waiting until April rolls around and be sure their payroll systems are compliant.
You can prepare for the upcoming SPA changes by:
- Identifying employees born between 6 April 1960 and 5 March 1961
- Using the Government State Pension age calculator to confirm individual SPA dates
- Making sure your payroll systems can handle mid-year category changes correctly
- Training payroll staff on updated reporting requirements
- Reviewing internal processes for collecting and recording proof of age
How can we support your payroll processes?
The upcoming changes to the SPA will affect your payroll compliance, workforce planning and even retirement strategy discussions with your senior employees.
With the right financial support, you can ensure your payroll stays accurate and remain aware of your employees’ and your own NI requirements.
Our professional team can help assess whether your payroll systems are prepared for the reforms and ensure correct NI category handling.
As more employees stay on in their role for longer, we can help forecast the workforce costs and assess how this will affect your cash flow.
For further advice or support with your payroll, contact our team today.
