UK Film & TV Budgeting Tips for 2026: Payroll Tax Changes Affecting Productions
Kristy Carty
On November 26, 2025 UK Chancellor of the Exchequer Rachel Reeves delivered the Autumn Budget, which set out various tax-raising measures worth up to £26b. In addition, the long-awaited Employment Rights Bill, which was a key part of the government's election manifesto, has passed Royal Assent, with many changes taking effect in April 2026.
Together, the Budget and the now-called Employment Rights Act introduce key changes to payroll and tax regulations which will affect film and TV budgets in 2026 and beyond, including:
- Increased minimum hourly rates;
- Changes to the Apprenticeship Levy payroll fringe;
- Changes to how non-UK residents are taxed;
- Changes to how salary sacrifice pension payments are taxed; and
- Increased corporation tax penalties.
If you’re planning to shoot your next film or TV show in the UK, this article provides a detailed overview of the key changes and how they will impact your production budget.
What’s staying the same: no changes to income tax or NICs for employees or the self-employed
Notably, the Budget did not make any changes to income tax or National Insurance Contributions (NICs) for employees or the self-employed. The UK income tax thresholds will also remain frozen until 2031.
What’s changing now: key payroll and tax changes affecting UK film and TV budgets in 2026
National Living Wage and National Minimum Wage increases
From April 1, 2026, the National Living Wage will increase by 4.1%, and the National Minimum Wage will increase by 8.5% for 18–20-year-olds and 6% for 16–17-year-olds and apprentices.
Productions will need to factor these increased rates into their payroll budgets from April 1, 2026.
Statutory Sick Pay changes
The Employment Rights Act extends employees’ right to Statutory Sick Pay (SSP) by:
- Removing the lower earnings threshold of £125 a week so that all employees, regardless of earnings, will qualify for SSP;
- Removing the three-day qualifying period, meaning that SSP will now be payable from the first day of the sickness absence rather than the fourth day; and
- Replacing the existing flat rate (currently £118.75 a week) with the lower of 80% of the employee’s average weekly earnings or the standard SSP flat rate (which is set to increase to £123.25 on 1 April, 2026).
Unlike maternity pay, employers cannot reclaim SSP from the government, so these changes will need to be factored into production budgets from April 1, 2026. Entertainment Partners will work with productions to ensure these changes are applied to your payroll automatically.
Paternity leave changes
As of December 29, 2025, employees whose partner dies in childbirth or in the first year after birth or a child’s adoption will be entitled to paternity leave regardless of their length of service.
The Employment Rights Act also makes paid paternity leave and parental leave a day-one right from 1 April 2026; previously, employees were required to have worked for their employer for one year to qualify for paid paternity leave and 26 weeks to qualify for paid parental leave.
As well as working with their payroll provider to implement these changes, production companies and studios will need to ensure that their family leave policies are up to date.
Apprenticeship Levy changes
The Apprenticeship Levy is a key UK payroll fringe aimed at funding apprenticeship programmes across the UK.
The core rate of the Apprenticeship Levy is not changing; employers whose annual payroll bill exceeds £3m will continue to be subject to a 0.5% levy.
However, from April 1, 2026, unused levy funds will expire within 12 months (instead of 24 months) and the government top-up will be removed. Production companies and studios who utilise the levy should undertake careful planning to ensure that they make the most of their training budget.
In addition, from January 1, 2026, the government will stop co-funding Level 7 apprenticeships (Master’s level programmes) for over 22-year-olds, meaning that studios or production companies which are subject to the levy will need to cover more of the training costs themselves.
On the other hand, for small and medium-sized companies (those with an annual payroll bill below £3m), apprenticeships for 16–24-year-olds will now be fully funded by the government, making it significantly cheaper to hire young talent (previously, free funding applied only to those under 22 years old).
Changes to taxation of non-UK residents
Various changes to the taxation of non-UK residents will apply from April 6, 2026.
- Abolition of dividend tax credit for non-UK residents: Non-UK residents who receive dividends from UK companies will no longer qualify for the non-resident dividend tax credit and will instead be taxed at the same rates as UK residents.
- Stricter treatment of temporary non-UK residents returning to the UK: All dividends received by temporary non-UK residents from a close company will be subject to income tax on return to the UK.
- PAYE for employees working across borders: For ‘internationally mobile’ employees who qualify for Overseas Workday Relief, the portion of their earnings which can be excluded from PAYE through a PAYE notification will be capped at 30%. Employers (or their agents) will need to submit an online notification to apply reduced PAYE.
- Changes to voluntary NICs for non-UK residents working abroad: Non-UK residents will no longer be able to pay the lower ‘Class 2’ NICS for periods spent abroad.
Entertainment Partners can work with production companies and studios who engage foreign cast and crew to ensure compliance with these new requirements.
Increased penalties for late Corporation Tax returns
The government has confirmed that the rates of Corporation Tax will remain unchanged from April 2026.
However, the penalty for taxpayers submitting a Corporation Tax return late will double for returns for which the filing date is on or after April 1, 2026. Production companies and studios should take note of this change to avoid any unexpected budget increases due to non-compliance.
Technical amendments to UK tax incentive legislation
Despite calls for changes to the high-end TV tax incentive, as well as a new incentive to help with the distribution and marketing of independent films, the government did not announce any significant changes to the UK’s creative sector tax relief regime.
However, it did issue technical amendments to the rules regarding the Audio-Visual Expenditure Credit (AVEC), Video Games Expenditure Credit (VGEC) and Research and Development Expenditure Credit (RDEC), including:
- Clarification that payments made between group companies in return for one company surrendering the AVEC, VGEC or RDEC to the other company are to be ignored for Corporation Tax purposes; and
- An update to the AVEC calculation of special credit for visual effects (VFX) to prevent anomalous results and set out the treatment of negative results if they arise.
What’s changing later: key payroll and tax changes affecting UK film and TV budgets in 2027 and beyond
Mandating reporting of benefits in kind via payroll software from April 2027
The government has confirmed that the use of payroll software to report and pay tax on benefits in kind will become mandatory, in phases, from April 2027. This will apply to income tax and Class 1A NICs.
If your production is working with Entertainment Partners, this change will automatically be implemented in line with the government timeline to ensure your production stays compliant.
Changes to salary sacrifice for pension contributions from April 2029
The government is also changing how salary sacrifice for pension contributions works.
‘Salary sacrifice’ is when an employee agrees to reduce their gross salary or sacrifice a bonus and, in return, the employer pays the same amount into their pension.
From April 1, 2029, only the first £2,000 of employee pension contributions through salary sacrifice each year will be exempt from NICs. Contributions through salary sacrifice (like all pension contributions) will still be exempt from Income Tax (subject to the usual limits).
Employers and employees can still make contributions above £2,000 through salary sacrifice arrangements. However, employee contributions above this amount will be subject to employer and employee NICs like other employee workplace pension contributions.
Employers will need to report the total amount sacrificed through their existing payroll. All employer pension contributions will continue to be free of NICs.
Notably, this cap is per year, not per engagement or employer. To help with this, employers will be required to report the total amount of salary-sacrificed pension contributions per employee to HMRC via their payroll software. Entertainment Partners will work with your production payroll team to ensure that NICs are applied correctly once the £2,000 cap is exceeded.
Other employment law changes to be aware of: extension of protections from unfair dismissal
Although unrelated to payroll, the Employment Rights Act has also extended the protections from unfair dismissal, which studios and production companies should be aware of.
Currently, individuals must be employed for two years before they qualify for protection against unfair dismissal. From January, 1 2027, this qualifying period will be reduced to six months. The cap on compensation that can be awarded for a finding of unfair dismissal will also be removed, although the date for this has yet to be announced.
Productions should take note of this change and seek guidance on how best to manage their risk in line with the new qualifying period.
Simplify film and TV budgeting and payroll with Entertainment Partners
When it comes to managing your UK film and TV productions, the team at Entertainment Partners is here for you every step of the way. We've got the budgeting solutions you need to manage your production finances, as well as UK-based film and TV payroll experts with years of industry experience to answer your questions and help you to stay compliant with the ever-changing regulations.
If you'd like to speak to our team about your next UK film or TV production, contact us today!
This article contains general information we are providing on a subject that may be of interest to you. Nothing in this article should be considered tax, accounting, or legal advice. You should consult with your own tax, accounting, or legal advisors regarding the applicability of this information to your specific circumstances.
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