Payroll Tax Year Changes 2024/25

The new fiscal year has brought about changes to payroll regulations, which demand attention and proactive adjustment to make sure your payroll is compliant, and your staff supported.

In this article we delve into the key payroll changes for 2024/2025, ensuring you are informed and prepared, so you can navigate these changes seamlessly.

Tax

While Income Tax remains unchanged for majority of the UK, it stands out as a significant topic in Scotland.

• Personal Allowance remains at £12,570
• No changes to the taxable thresholds for England, Wales & Northern Ireland
• In Scotland, thresholds for all but the Top rate of tax have changed. The Scottish Advanced Rate has also been introduced at 45%, while the Top Rate has increased to 48%

National Insurance Contributions

This tax year, National Insurance has been a significant consideration for employees.

• Primary Threshold for NICs remains at £12,570
• Off the back of a reduction to 10% in January 2024, the NI primary contribution will see a further cut to eight 8% on earnings between £12,570 and £50,270 from 6 April 2024
• Reduction in NICs applies to employee contributions only.
• There are some new categories, known as specialist tax sites for NIC rates and thresholds (for employee NIC only)

National Minimum Wage and National Living Wage

Ensure that your payroll reflects the recent notable increases in the National Living Wage and National Minimum Wage, marking one of the most substantial rises in recent history.

Statutory Payments

Payments under the Statutory scheme are set to receive a modest increase for the fiscal year 2024/25, covering various forms of parental and sick pay. These include:

• A new parental pay rate of £184.03 (up from £172.48), from 7 April 2024 applies to:
  • Statutory Maternity Pay (SMP)
  • Statutory Adoption Pay (SAP)
  • Statutory Paternity Pay (SPP)
  • Statutory Shared Parental Pay (ShPP)
  • Statutory Parental Bereavement Pay (SPBP)
• The statutory sick pay rate is also set to increase to £116.75 per week (up from £109.40) from 6 April 2024
• The minimum average weekly earnings (AWE) remains at £123

Student Loans

The starting thresholds for employee payments towards student loans under Plans 1 and 4 have risen, while there’s no change for Plan 2.

• Plan 1 threshold = £24,990 Per year
• Plan 2 threshold = £27,295 per year
• Plan 4 threshold = £31,395 per year
• All deductions for above remain at 9%

Changes to post-graduate loans have yet to be announced, the current threshold is £21,000 per year (deduction at 6%).

Holiday Pay – changes for zero-hour employees

Starting from April 1 2024, in the new leave year, employers can ‘top up’ employee’s earnings in any specific pay period at a rate of 12.07%. This means that rolled-up holiday pay is now lawful for zero-hour or part-year workers.

This applies only when the employee hasn’t taken any statutory parental or sick leave in the month. If an employee has taken statutory parental or sick leave in the current month, their average pay should be calculated using gross pay from the past 52 weeks. This means they’ll receive 12.07% of total earnings in the period related to weeks worked, plus an additional top-up for pay not received for periods of statutory parental or sick leave.

Alternatively, employers can also choose to set up an accrual for these kinds of employees, also using the 12.07% rate based on hours worked over the last 52 weeks. This approach allows employees to receive holiday pay at the time they take their annual leave, rather than receiving a portion of holiday pay each month.

Employment Allowance & Apprenticeship Levy

There are no changes to the employment allowance & apprentice levy.

• The EA remains at £5,000.
• The Apprentice Levy rate is 0.5%, allowance is £15,000 across the year, or pay bill over £3 million.

What next?

If you would like further information regarding the payroll updates, please do not hesitate to contact our payroll team here.