As 2025 progresses, UK businesses need to stay ahead of key payroll changes that could impact their bottom line. From increased National Insurance costs to new rules on payrolling benefits and minimum wage rises, employers have a lot to prepare for. These shifts bring both challenges and opportunities, particularly for those who plan ahead.
In this article, Payroll Director Marc Taylor down the upcoming payroll changes, their potential impact, and how businesses can navigate them effectively. Plus, we’ll explore how Gravita’s payroll team can support employers in managing these adjustments smoothly.
Table of Contents
Class 1 Employer National Insurance increases
Upcoming change
From April 2025 all Uk employers will have to pay 15% national insurance on all employees’ earnings above the secondary threshold. The secondary threshold will be reduced from £9100 to £5000 per annum.
Impact of change
This change will mean that for any employees in your workforce who earn above £5000 a year (£416.67 monthly), 15% of national insurance will be due as opposed to the present 13.8%. The reduction in the threshold will also push lower earners into paying employer national insurance.
Below is an example calculation of the impact:
A monthly employee paid £1000 will have the following employer national insurance due at 15%:
£1000 – £416.67 = £583.33 x 15% = £87.50 ER NICS
As a comparison to the current tax year:
£1000 – £758.00 = £242 x 13.8% = £33.40 ER NICS
For a single employee earnings £12,000 a year this is an increase of £54.10 in your class 1 employer national insurance due.
How can Gravita help?
1) Gravita can assist UK employers in several ways. Firstly, please check out Gravita’s online Employer Class 1 National Insurance calculator which forecasts the additional employer national insurance due come April 2025 based on the current salaries of your employees.
2) UK Employers also have the right to set up a workplace pension scheme under the tax basis of salary sacrifice. Salary sacrifice will allow an employee to sacrifice part of their contractual salary in receipt of a non-cash benefit, in this case, an enhanced employer pension contribution. The sacrificed amount is not subject to tax or NI therefore reducing an employee’s nicable and taxable pay through payroll meaning employees pay less income tax and both employee and employer pay lower class 1 national insurance due.
Below is an example calculation of salary sacrifice:
If an employee who is paid 5K per month entered into a salary sacrifice arrangement for 5% of their earnings, then their nicable pay would be reduced as follows:
£5000 x 5% = £ 250 = £4750 nicable pay.
Employer’s national insurance is now due on the lower figure of £4750 as opposed to £5000. Our payroll department can set up a salary sacrifice pension scheme arrangement on your behalf and our HR team can assist with any necessary contractual changes that may need to be made to any of your employees’ contracts of employment.
A salary sacrifice type of arrangement does have its pros and cons therefore please see the link below for more details.
Payrolling of benefits
Upcoming change
From April 2026, HMRC have ruled that for all employee benefits in kind previously declared to the revenue through a P11D submission, that these will now have to be submitted through an employer’s payroll RTI submission and income tax paid in real time.
Impact of change
As a UK employer, this will mean that if you provide any benefits in kind to employees, that you will need to have registered these to payroll with the HMRC before the start of the 2026-27 tax year deadline. Tax due on benefits will then be collected through the payroll in real time and not from P11D adjusted tax codes.
The good news here for UK employers is that there will no longer be a requirement to submit a P11D form for any benefits in kind which are payrolled taking away this additional admin burden.
How can Gravita help?
Gravita can assist UK employers by registering any benefits in kind to payroll online. This can be done early and before the start of the 2026-27 tax year deadline if registered before the 6th April 2025 then you will be able to payroll benefits in time for the 2025-26 tax year.
Once registered to payroll benefits, you will need to provide the monthly cash equivalent value of the benefit to the payroll department who will process this notionally for tax through payroll.
Below is an example calculation of how this will work:
- Employee has a £600 a year healthcare plan which is a benefit in kind.
- £50 of this is processed through the monthly payroll as a cash equivalent value
- This £50 is added to the employee’s normal salary to be taxed.
- £5000 salary + £50 benefit in kind.
- The employee pays tax on £5050 paying the tax due in real time.
- The £50 is then deducted again as this is only a notional payment to add to taxable pay.
- The employee has paid tax in real time on their benefit in kind.
The Gravita payroll and HR team can also help formulate any employee communications to inform employees of the upcoming changes and how these will impact them financially.
Increases to National Minimum and Living Wage
Upcoming change
Come April 2025, the rates of pay for the national living and minimum wage will be increased again by the UK government. HMRC has confirmed the new planned rate of pay.
Impact of change
This increase will mean an additional burden upon UK employers as the total gross salary of minimum wage employees rises further.
How can Gravita help?
Gravita can assist by helping UK employers forecast and be ready for this change.
The Gravita payroll department can also review your workforce to make sure that your planned new hourly rates of pay are correct.
Employment allowance increase
Upcoming change
HMRC will increase the current employment allowance amount reclaimable to £10,500 from the current lower value of £5000. HMRC will also remove the previous tax years Class 1 employer NI eligibility test which was previously set at 100K.
Impact of change
This means that all UK employers are eligible to receive the £10.500 employment allowance to offset their total Class 1 ER NICs due. (Please note the allowance is only applicable across one group company and can only be used to offset any employer national insurance due)
How can Gravita help?
Gravita can ensure the allowance is set up and claimed correctly by taking ownership of your payroll administration from the start of the new 2025-26 tax year.
