The State Pension age increase (from 66 to 67 years) is being phased in over the next two years, starting from 6 April 2026, meaning that anyone born between 6 April 1960 and 5 March 1961 will reach their individual State Pension age at 66 years and a specified number of months. A State Pension age calculator tool on GOV.UK can be used to find individual dates.
As an employer, you will need to:
- Update your payroll records
Employers still need to make secondary Class 1 contributions despite the fact that employees are no longer liable to pay National Insurance when they get to State Pension age. Employers need to check for staff in this age bracket and update payroll records accordingly when someone reaches State Pension age. In payroll software, you will need to change the National Insurance category letter to ‘C’ to stop deductions. The change is needed for the first payment date after State Pension age is reached. Year-to-date information should still be reported under the old category letter until the end of the tax year.
- Provide proof
Employers need to provide proof that someone has reached State Pension age. Examples of proof of age include a birth certificate or passport. Another accepted form of proof would be a certificate of age exception (CA4140) which are no longer being issued, but some employees may already have one.
- Communicate with your employees
Employees who choose to claim their State Pension, instead of deferring it, are likely to receive a new tax code. Although State Pension is taxable, tax is not currently deducted at source, so the coding will need adjustment to reflect the new source of income. It is advisable to provide your employees with relevant explanations at the outset in order to manage expectations and pre-empt queries.
We provide a fully managed payroll service that is tailored to the exact requirements of your business so that you can focus your attention elsewhere. Please get in touch if you’d like to find out more about how we can help your business with this subject.
