Academy Trust Handbook 2026: what do the changes mean for academies?

While the Academy Trust Handbook 2026 (‘the 2026 handbook’) remains focused on financial governance, the 2026 updates affect how academy trusts recruit senior staff, set pay, handle severance payments, and oversee the skills and accountability of key finance roles.  Overall, the changes place greater emphasis on strong governance, clear record keeping, and careful decision making. 

Special staff severance payments

The 2026 handbook makes important changes to the use of special staff severance payments. These are payments made to employees outside statutory or contractual requirements when leaving public service, whether they resign, retire, are dismissed or reach an agreed termination of employment. They are different to ex gratia and compensation payments which tend to arise in circumstances other than leaving employment. Ex gratia payments are subject to Department for Education (DfE) approval, at any level, and there are also restrictions on the levels of other payments that can be made without DfE approval. 

The 2026 handbook continues to state that staff severance payments should not reward failure, including gross misconduct or poor performance. 

DfE approval remains necessary where: 

• An exit package of £100,000 or above includes a special severance payment
• The employee earns over £174,000; or
• A payment is novel, contentious or repercussive

The 2025 handbook gave the example of an exit package containing a confidentiality agreement as a novel, contentious or repercussive payment. The 2026 handbook retains this example and adds a further one. It now expressly states that a payment is also regarded as novel, contentious or repercussive where the trust has received legal advice that it has a greater than 50% chance of successfully defending the matter in court or tribunal. 

In these circumstances, you will need to explain why you propose settling the claim, and obtain the necessary DfE approval before proceeding, regardless of payment level. This reflects closer scrutiny where you have a strong legal defence but nevertheless wish to reach a negotiated settlement. 

Consistent with the previous version of the handbook, DfE approval is also required where a staff severance payment includes a non-statutory or non-contractual element of £50,000 or more (gross, before income tax or other deductions). 

The 2026 handbook also continues to set out a number of factors that academies must consider before making an offer of a staff severance payment, regardless of its value. It is clear from the amendments that there is a firm expectation that legal advice is sought, that alternative options have been properly explored and the justification is documented. 

Specifically, it requires you to keep clear records and retain evidence of the management and approval process. These records should include: 

• The legal advice received
• The reasons for the decision
• The evidence supporting the decision
• How the trust assessed value for money

You should review settlement processes in light of these changes and understand when DfE approval is needed, when legal advice is required and what records must be kept. 

Confidentiality clauses

The 2026 handbook also clarifies the use of confidentiality provisions in association with special staff severance payments. It makes clear that confidentiality clauses are always novel, contentious or repercussive and cannot be used without prior DfE approval. 

Like the 2025 handbook, the updated version states that for any severance payment, special or otherwise, a confidentiality clause must not prevent an individual from making disclosures in the public interest under whistleblowing legislation. It must also not prevent the DfE from obtaining enough information from trusts to assess such payments as part of its regulatory role. 

Setting executive pay

The 2026 handbook tightens the rules on executive remuneration. 

Consistent with the 2025 handbook, you must ensure your approach to pay and benefits is transparent, proportionate and defensible, and must document this in an agreed pay policy. 

However, the 2026 handbook strengthens the restrictions on executive pay increases. Previously, the 2025 handbook stated that there should be a basic presumption that executive pay and benefits would not rise at a faster rate than teachers’ pay. The updated 2026 handbook goes further as it now states that executive remuneration must not increase at a faster rate than academy trust teachers’ pay unless there is clear justification. If you consider there is justification, you must seek DfE approval in advance. 

The 2026 handbook also introduces senior pay controls for new appointments. From 1 October 2026, for new appointments within academy trusts where remuneration exceeds £174,000, or the pro rata equivalent for part-time staff, or where performance-related pay is above £25,000, DfE approval must be obtained before the post is advertised.

It is recommended that all trusts review their processes for setting and reviewing executive pay to ensure it adheres to the handbook and related guidance. We can help with this - get in touch with Jenny Arrowsmith. 

Chief financial officer

The 2026 handbook gives more detail about the chief financial officer (CFO) role. It states that the CFO should play both a technical and leadership role, including attending finance committee and audit and risk committee meetings to help trustees provide effective financial oversight. 

The 2026 handbook also strengthens expectations around CFO qualifications in larger trusts. Previously, trusts with over 3,000 pupils were encouraged to consider the range of accountancy qualifications and take this into account when recruiting a CFO. The 2026 handbook goes further and states that the CFO should hold a professional accountancy qualification. 

The handbook also introduces new recruitment requirements: 

• For a recruitment exercise commencing on or after 1 October 2026, it should specify that the person should be a qualified accountant and a member of the relevant professional accountancy body and/or hold the CIPFA level 7 qualification.
• For a recruitment exercise commencing on or after 1 September 2027, it must specify that the person should be a qualified accountant and a member of the relevant professional accountancy body and/or hold the CIPFA level 7 qualification. It also states that if a trust plans to appoint a new CFO who is not a qualified accountant or holder of the CIPFA level 7 qualification, it must inform the DfE in advance and provide an explanation.  

These changes may affect recruitment strategies, succession planning and the content of job descriptions. 

Electric vehicle salary sacrifice schemes

The 2026 handbook changes the approval position for electric vehicle salary sacrifice schemes. You do not need prior DfE approval if you have comprehensive mitigations in place to ensure that no cost or liability falls on the trust if an employee does not fulfil their contractual obligations with the scheme provider, and the trust is not under a Notice to Improve. 

You must clearly document the comprehensive mitigations and must follow the electric vehicle salary sacrifice guidance. 

Before offering or expanding a scheme, you should therefore review the contractual terms, understand the potential liabilities and record how you have protected the trust. 

Practical steps for academies

You should use the 2026 handbook as a prompt to review employment-related governance before 1 October 2026. 

In particular, you should:

• Review CFO criteria, recruitment plans and succession arrangements
• Check your senior pay approval processes
• Review your electric vehicle salary sacrifice schemes
• Ensure that Executive pay decisions are robust, defensible and evidence based with regard to wider trust pay increases
• Mitigate risk of breach by informing relevant teams so they understand when DfE approval is required for entering into severance payment arrangements
• Seek legal advice on the merits of and justification for paying severance payments
• If you use a settlement agreement precedent, take advice on it

The overall direction of travel is clear. The DfE expects trusts to take a more structured and evidence-based approach to workforce-related financial decisions. 

We can support you, please contact Jenny Arrowsmith for more information. 

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