As we are approaching the 2025/26 tax year, enclosed is a summary of what we are aware is changing, together with a recap from a payroll perspective in the key areas that will affect your business. The Spring Forecast is being held on 26 March 2025 so further changes may well be announced.
Tax Rates & Thresholds
HMRC have confirmed the standard personal allowance for 2025/26 will remain at £12,570 until April 2028.
There are no changes to the tax rates.
Scottish tax thresholds will alter slightly.
National Insurance Rates & Thresholds
The lower earnings limit (LEL) at which an employee qualifies for certain benefits including state pension, is increasing from £6,396 to £6,500 per annum.
As we mentioned on a previous update, there is a notable change to the employer’s national insurance rate and threshold.
The rate of employer’s national insurance is increasing by 1.2% from 13.8% to 15%, with the threshold at which it is payable reducing from £9,100 per annum to £5,000 per annum.
If you want a detailed analysis of how this will affect your business, or to explore if there are salary sacrifice opportunities available to reduce the total liability, get in touch and we can provide a quote based on your requirements.
Statutory Payments & Leave
SSP is increasing to £118.75 per week from 6 April 2025. Future changes to SSP legislation are planned under the Employment Rights Bill, which will remove the 3 day waiting period and earnings eligibility threshold. No confirmed date is in place of yet.
SMP and SAP pay is increasing to £187.18 per week or 90% of Average weekly earnings, whichever is the lower. This rate is the same for statutory paternity, parental bereavement pay and shared parental leave. In addition, small employers’ relief is increasing to 108.5% for those with total NI of £45k or less in the previous tax year. Your payroll contact will be able to determine if this is due.
A reminder that Carers leave became effective from 6 April 2024 and is an unpaid entitlement to 1 week’s leave which can be taken in one block or flexibly.
From 6 April 2025 neo-natal pay and leave will become law. This is payable at the rate of £187.18 per week (or 90% of AWE if lower) and payable for up to 12 weeks in 1 week increments. It is paid in addition to other absence pay leave and entitlements.
National Minimum Wage (NMW)
New rates apply from 1 April 2025. They should be implemented in the pay reference period that starts on or after this date. If any wages need increasing due to these changes, please inform your payroll contact: –
| 21 and over | 18 to 20 | Under 18 | Apprentice (if Under 19 or Over 19 & in first year of apprenticeship) | ||
|
£12.21 |
£10.00 |
£7.55 |
£7.55 |
HMRC have recently recruited additional compliance staff and are selecting employers based on geographical location for NMW checks. It is important that deductions do not reduce pay below the relevant rate, as penalties for non-compliance are significant. Examples of item’s that can count towards minimum wage calculations but not restricted to are: –
- Deductions for work equipment, uniform, meals, parking
- Salary sacrifice arrangements.
- £1 admin fee for court orders
Apprenticeship Levy and connected companies.
If you have connected companies that together the pay bill is £3 million per year, then all companies are liable to pay the apprenticeship levy. You only have one apprenticeship allowance of £15,000 but can split the levy over the different entities. The levy is calculated on each payroll individually and dependant on how the levy allowance is distributed, will affect how much each connected company will pay. If this applies, do let your payroll contact know how it should be allocated.
Employment Allowance
Employment allowance for 2025/26 is increasing from £5,000 to £10,500 per annum and the £100k employers NI cap has been removed.
Although now open to more businesses, there is still certain criteria limiting eligibility: –
You cannot claim if:
- You are a single-director company and that director is the only employee paid above the secondary threshold, if you have 2 Directors then both must be paid over the secondary threshold of £5,000 per annum to be eligible.
- More than 50% of your work is in the public sector.
- You employ someone for personal/household work (like a nanny or gardener)
- You are a connected company and already claiming the allowance through another payroll.
If you think you are entitled to the allowance, speak to your payroll contact if you want to claim for 25/26.
National Insurance Relief
- Veterans National Insurance Holiday – employers NIC relief will continue to be available from April 2025 to employers of qualifying veterans.
- Freeports & Investment Zone National Insurance relief – will continue to be available from April 2025
- Apprentice National Insurance Relief – available to employers if an apprentice is under 25, on an approved UK government apprenticeship and earns less than £967 per week. If using this relief, your payroll contact must be informed once the apprenticeship ends to avoid any underpayments.
HMRC PAYMENTS – PAYING PAYE BY DIRECT DEBIT
A reminder there is an added function so employers’ can pay their PAYE liabilities by direct debit. You only need to set this up once and payment will be automatically collected going forward.
This is restricted to employers only and there is no scope for agents to do this on your behalf.
HOW CAN YOU SIGN UP FOR THIS?
This service can be access through Pay employers’ PAYE or through the business tax account dashboard.
Payrolling Benefits
Payrolling Benefits will become mandatory from April 2026.
If you intend to start payrolling benefits prior to this and do not already have an agreement in place with HMRC, you need to register before the start of 6 April 2025. You can currently payroll all benefits except employer provided living accommodation and beneficial loans so be aware you will still need to submit P11D’s if any of these apply.
https://www.gov.uk/guidance/paying-your-employees-expenses-and-benefits-through-your-payroll
Salary Sacrifice
A salary sacrifice arrangement can increase an employee’s net pay, as well as reducing the amount of National Insurance employers must pay.
Employees agree to forego part of their salary in return for non-cash benefits which can enable tax and national insurance savings.
Since April 2017 HMRC have restricted what can be offered via salary sacrifice but examples that can be effective are pensions, ultra-low emission cars, cycle to work schemes, holiday purchase schemes.
Careful consideration is also needed to ensure any salary sacrifice scheme does not reduce an employees pay below minimum wage.
If you are interested in implementing a salary sacrifice scheme, do get in touch for further advice.
Pension Re-enrolment & Declaration of Compliance
Automatic re-enrolment occurs every 3 years. Employees must be assessed and re-enrolled into the workplace pension scheme if applicable. In addition, employers have an obligation to complete a Redeclaration of Compliance to The Pension Regulator and this must be submitted no later than 5 months after your re-enrolment date. You will incur a penalty if you fail to complete this accurately and on time.
Your payroll contact can provide a quote for processing the Declaration on your behalf or you can complete this via the attached link.
https://www.thepensionsregulator.gov.uk/en/employers/re-enrolment
If you would like any further information, please get in touch.