The state pension age changes beginning from 6 April 2026 could create practical payroll issues for employers. While the change itself has been known about for some time, the payroll treatment will need to be handled carefully as employees begin to reach the new State Pension age. In particular, employee Class 1 national insurance contributions will no longer be payable once State Pension age is reached.
State Pension age
The increase in State Pension age from 66 to 67 will be phased in from 6 April 2026. Men and women born between 6 April 1960 and 5 March 1961 will reach State Pension age at 66 years plus a specified number of months. Pension age will be 67 for anyone born on or after 6 March 1961.
For example, someone born on 5 May 1960 will reach State Pension age on 5 June 2026. However, for someone born one day later, it will be 6 July 2026.
Class 1 NICs
Although employee Class 1 NICs are no longer payable once an employee reaches State Pension age, employer contributions will still be due. That distinction is important and should not be missed.
For employees, the change applies to the first wage or salary payment made on or after State Pension age is reached. NIC classification is based on the date of payment, not the earnings period.
For example, NIC category letter C will be used for the whole of the June 2026 salary, paid at month end, for any employee who has reached State Pension age on or before 30 June 2026.
Payroll checks for employers
Employers should check that the employee’s NI category letter has been set to C in payroll software so that no further employee Class 1 NICs are deducted. In some cases, this may be done automatically by the software using the employee’s date of birth.
The normal procedure is for the employee to show proof that they have reached State Pension age, usually with either a birth certificate or passport.
These state pension age changes may seem straightforward at first. However, the timing of payroll runs and the date of payment will matter. That is where mistakes could easily be made if records are not checked in time.
Self-employed taxpayers
For the self-employed, the NIC position on reaching State Pension age is more straightforward. They simply stop paying Class 4 NICs from the start of the tax year after reaching State Pension age.
Checking State Pension age
State Pension age can be checked using the government’s check your State Pension age calculator.
As the new State Pension age starts to be phased in, payroll processes should be reviewed carefully. For employers, the main issue is making sure NIC treatment is handled correctly once an employee reaches State Pension age. A small payroll detail can still have wider consequences if it is overlooked.