The new tax year kicks off on 6th April 2025, bringing significant payroll changes that every employer needs to know about. From notable hikes in Employer National Insurance Contributions and expanded Employment Allowance eligibility, to new statutory payments supporting parents, staying informed is essential to ensuring compliance and maximising the benefits for your business and employees.
Here, Jaspreet Bassi from our payroll team breaks down the critical updates clearly and concisely, helping you get ahead of the changes before they take effect.
Table of Contents
Tax
- Personal Allowance remains at £12,570
- No changes to the taxable thresholds or rates for England, Wales & Northern Ireland and the chancellor has stated these will remain frozen until at least April 2028
- Scotland are seeing some changes to their Starter, Basic and Intermediate thresholds.
- The Scottish thresholds for Higher, Advance and Top rate tax remain as do the tax rates for all Scottish thresholds
NICs
- The most significant changes announced are relating to National Insurance Contributions (specifically for the employer)
- Employers NIC is rising from 13.8% to 15% as of 6th April 2025
- The threshold from when employers begin to pay ER NIC is also being lowered from £9,100 to £5,000!
- There are no threshold or rate changes for employee NIC as this continues to align with the Personal Allowance
Employment Allowance and Apprenticeship Levy
- Huge increase to this – Employment Allowance rising to £10,500 from £5,000
- Earnings cap of £100K will also be removed, meaning more employers will benefit from EA where they weren’t historically
- Criteria still remains for EA regarding sole directors and connected companies
- No changes to Apprenticeship Levy rate (0.5%), allowance (£15,000 across year) or pay bill (over £3million)
Small Employer Relief
- SER is increasing from 103% to 108.5% meaning small employers can reclaim more against statutory payments
- This is not applicable to SSP as this remains unrecoverable
National Minimum Wage and National Living Wage changes
| 21 and over | 18 to 20 | Under 18 | Apprentice | |
April 2024 (current rate) | £11.44 | £8.60 | £6.40 | £6.40 |
April 2025 | £12.21 | £10.00 | £7.55 | £7.55 |
Apprentices
Apprentices are entitled to the apprentice rate if they’re either:
- aged under 19
- aged 19 or over and in the first year of their apprenticeship
Statutory Payments
- Stat payments are also seeing a small boost for 2025-26, covering all types of parental pay and sick pay
- Rising from £184.03 to £187.18 (or 90% of average weekly earnings – whichever is lower) For the following statutory payments
- 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 from £116.75 to £118.75 and the threshold for eligibility has also increased from £123 to £125 per week. There are potential developments to SSP which will be released later this year.
- There is a new Statutory Neonatal Care Payment which will benefit parents of newborns who require specialist neonatal care (rate of pay is £187.18 or 90% of the employees average weekly earnings, whichever is lower)
- This is available to employees whose baby requires at least 7 continuous days of neonatal care within the first 28 days of life
- They would receive up to 12 weeks of paid leave in addition to standard maternity, paternity and shared parental leave
Student Loans
- Changes to the threshold for Plan 1, 2 and 4
- Post graduate threshold remains the same
- Rate deductions remain the same
- Introduction of Plan 5 for those beginning their studies on or after 1st August 2023
Loan Type | Rate | 2024/2025 | 2025/2026 |
Plan 1 | 9% | £24,990 | £26,065 |
Plan 2 | 9% | £27,295 | £28,470 |
Postgraduate | 6% | £21,000 | £21,000 |
Plan 4 (Scotland) | 9% | £31,395 | £32,745 |
Plan 5 (England from April 2026) | 9% | N/A | £25,000 |
Holiday Pay – changes for zero hour employees
- Continuing the changes from 1st April 2024, employers can ‘top up’ employee earnings in any specific pay period at a rate of 12.07%. In other words, rolled-up holiday pay is now lawful for zero-hour or part-year workers.
- Employers should determine the kind of worker they have to determine how holiday pay should be calculated and paid. Please speak with a member of our payroll team if unsure
Payrolling Benefits
- From April 2026, HMRC will make payrolling of benefits mandatory, replacing the P11D submission process
- This shift means that benefits in kind will be taxed in real-time through PAYE tax deduction, rather than being reported at the end of the tax year as we are currently
How Gravita can help
Ready to tackle payroll for 2025-26 with confidence? Book a consultation with our payroll team today for expert guidance tailored specifically to your business.
