By Paul Chappell

7th August 2025

Carrying over accrued holiday pay

Annual leave is a vital component of work-life balance, but understanding the rules around carrying over unused accrued holiday can be complex as can working out the holiday pay rate.

This blog explains the regulations regarding holiday carryover, recent changes, and best practices for both employers and employees.

Understanding holiday entitlement in the UK

Under UK law, most workers are entitled to 5.6 weeks (28 days) of paid holiday per year. This can include public holidays, depending on employment contracts. This entitlement is governed by the Working Time Regulations 1998, with some important updates in recent years.

Basic rules for holiday carryover

The standard position in UK employment law is that workers must take at least 4 weeks of their statutory annual leave within the leave year.

The remaining 1.6 weeks can be carried over to the next leave year if the employer agrees. Additional contractual holiday (beyond the statutory 5.6 weeks) may be carried over according to the terms of employment

Exceptions to standard carryover rules

Several circumstances allow for extended carryover:

1. Sickness Absence

If a worker cannot take their holiday due to sickness, they can carry over up to 4 weeks of unused leave. This leave should ideally be
taken within the next leave year, but can be taken within 18 months from the end of the leave year in which it accrued.

2. Maternity, paternity, adoption, and parental leave

Workers on these types of family-related leave cannot take holiday whilst on leave, but continue to accrue holiday. Any unused holiday due to these absences can be carried over to the next leave year.

Implications for holiday pay

When holiday is carried over:

The rate of holiday pay should be the same as if the holiday had been taken in the original leave year
Upon termination of employment, workers are entitled to payment for any untaken statutory holiday, including carried-over leave
Employers can consider making a payment in lieu of the worker taking the holiday

Best practices for employers

Clear policy documentation: Establish and communicate a clear holiday policy that addresses carryover provisions
Regular tracking: Maintain accurate records of holiday entitlement, usage, and carryover
Encourage holiday use: Promote a healthy work culture by encouraging employees to take their full entitlement within the leave year
Consider flexible options: Some employers allow limited carryover with deadlines for using carried-over days
Address long-term absence: Develop specific provisions for managing holiday accrual during extended absences

Advice for employees

Know your rights: Familiarise yourself with both statutory entitlements and your specific employment contract
Plan your leave: Try to schedule holidays throughout the year to avoid last-minute rushes
Communicate early: If you foresee difficulties using your full entitlement, speak with your employer as soon as possible
Document everything: Keep records of holiday requests, approvals, and any agreements regarding carryover
Seek advice: If disputes arise, consider consulting ACAS, a union representative, or an employment law specialist

Managing holiday carryover effectively requires understanding the legal framework, maintaining clear policies, and fostering open
communication between employers and employees. While the default position limits carryover, various exceptions exist to protect workers’
rights in specific circumstances.

By approaching holiday management proactively, both employers and employees can ensure compliance with legal requirements while promoting well-being and work-life balance.

Need more information on accrued holiday pay? Speak to an Ascend Payroll advisor today.

Author

Paul Chappell

Paul started his career at the Inland Revenue, now HMRC, where he spent 14 years as a Tax Inspector, Employer Compliance & VAT Manager and PAYE Auditor. It gave him an inside view of how HMRC thinks and what it looks for when it comes knocking.

He then spent 11 years at a regional accountancy practice, advising clients on tax and guiding them through HMRC investigations from the other side of the table.

From there, it was a natural step into payroll. Paul took on a Compliance and Legislation role at an award-winning payroll provider, where he made sure processes were watertight and payroll teams were fully trained on every change.

After a short break, he was tempted back and joined Ascend as Head of Legislation and Compliance in November 2024.

Paul's focus is on keeping Ascend and its clients on the right side of the rules. He tracks new legislation as it lands, turns it into clear guidance for the team and writes many of Ascend's plain-English articles and guides.

For Paul, good compliance is about getting ahead of change.

"Employment law and payroll legislation are changing faster than I've seen in my whole career. The businesses that cope best are the ones that prepare early, long before a new rule becomes a deadline.
My job is to take the complicated stuff and make it simple, so our team and our clients know exactly what's changing, what it means for them and what they need to do about it."

That's the approach he brings to every update: spot what's coming, explain it clearly and make sure no client is caught out.

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Paul is Ascend's Head of Legislation and Compliance, with over 30 years of experience in tax and payroll, including a decade as a HMRC Tax Inspector. He leads on compliance, keeping the team and clients up to speed with the latest and future changes. When our clients have a specific challenge or complex query, Paul is the man to sort it out.

everything PAYE, tax, National Insurance, pensions, keeping Ascend's team and clients one step ahead of every legislative change.

Frequently asked questions related to this blog

What is the standard rule for carrying over unused holiday in the UK?

Under UK law, most workers are entitled to 5.6 weeks (28 days) of paid holiday per year, governed by the Working Time Regulations 1998. The standard position is that workers must take at least 4 weeks of their statutory annual leave within the leave year. The remaining 1.6 weeks can be carried over to the next leave year if the employer agrees. Additional contractual holiday beyond the statutory 5.6 weeks may be carried over according to the terms of the employment contract.

When can employees carry over more than the standard allowance?

Several circumstances allow for extended carryover. If a worker cannot take their holiday due to sickness, they can carry over up to 4 weeks of unused leave. This should ideally be taken within the next leave year, but can be taken within 18 months from the end of the leave year in which it accrued. Workers on maternity, paternity, adoption, or parental leave cannot take holiday whilst on leave but continue to accrue it. Any unused holiday due to these absences can be carried over to the next leave year.

How does holiday carryover affect holiday pay calculations?

When holiday is carried over, the rate of holiday pay should be the same as if the holiday had been taken in the original leave year. Upon termination of employment, workers are entitled to payment for any untaken statutory holiday, including carried-over leave. Employers can also consider making a payment in lieu of the worker taking the holiday. Getting the holiday pay rate right for carried-over leave is important, particularly for variable-hours workers where average earnings calculations apply.

What should employers do to manage holiday carryover effectively?

Establish and communicate a clear holiday policy that addresses carryover provisions. Maintain accurate records of holiday entitlement, usage, and carryover. Promote a healthy work culture by encouraging employees to take their full entitlement within the leave year. Some employers allow limited carryover with deadlines for using carried-over days. Develop specific provisions for managing holiday accrual during extended absences such as sickness or family leave. With the Fair Work Agency expected to enforce holiday pay record-keeping requirements, having robust tracking in place is increasingly important.

What should employees know about carrying over holiday?

Familiarise yourself with both statutory entitlements and your specific employment contract. Try to schedule holidays throughout the year to avoid last-minute rushes at year end. If you foresee difficulties using your full entitlement, speak with your employer as soon as possible. Keep records of holiday requests, approvals, and any agreements regarding carryover. If you were unable to take holiday due to sickness or family leave, you may have rights to carry it over that go beyond the standard 1.6 weeks. If disputes arise, consider consulting ACAS, a union representative, or an employment law specialist.

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About the Author

Paul is Ascend’s Head of Legislation and Compliance, with over 30 years of experience in tax and payroll, including a decade as a HMRC Tax Inspector. He leads on compliance, keeping the team and clients up to speed with the latest and future changes. When our clients have a specific challenge or complex query, Paul is the man to sort it out. everything PAYE, tax, National Insurance, pensions, keeping Ascend’s team and clients one step ahead of every legislative change.

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