Is your payroll system prepared for changes in the upcoming tax year?

We are getting ever closer to the 2025/26 tax year, when changes to payroll regulations announced last year will come into effect.  

Employers need to stay informed and adjust their payroll systems accordingly to ensure compliance.  

New National Minimum Wage rates 

Effective from 1 April 2025, the National Minimum Wage (NMW) rates will increase as follows: 

• National Living Wage (age 21 and over) – Rising from £11.44 to £12.21 per hour, marking a 6.7 per cent increase. 

• Ages 18 to 20 – An increase from £8.60 to £10.00 per hour, representing a 16.3 per cent rise. 

• Under 18 and apprentices - Rates will go up from £6.40 to £7.55 per hour, an 18 per cent increase. 

These adjustments aim to reflect the cost of living and ensure fair compensation for workers across all age groups.  

New employer National Insurance contribution rate 

From 6 April 2025, there will be changes to the Employer's National Insurance Contributions (NICs): 

• Rate increase – The standard rate for employer NICs will rise to 15 per cent. 

• Secondary threshold adjustment – the threshold at which employers start paying NICs will decrease from £9,100 to £5,000 per annum. 

Changes to Employment Allowance 

To support employers, particularly smaller businesses, the Employment Allowance will undergo the following modifications from 6 April 2025: 

• Allowance increase – The maximum annual Employment Allowance will double from £5,000 to £10,500. 

• Eligibility expansion – The previous restriction, which disallowed employers with a secondary Class 1 NIC liability exceeding £100,000 from claiming the allowance, will be removed. This change opens up the Employment Allowance to all eligible businesses and charities, regardless of their NIC liabilities in the prior tax year. 

Changes to statutory pay rates 

As of April 2025, the UK Government has confirmed the following updates to statutory pay rates: 

Statutory Maternity Pay (SMP), Statutory Paternity Pay (SPP), Statutory Adoption Pay (SAP), Statutory Shared Parental Pay (ShPP), and Statutory Parental Bereavement Pay (SPBP) will all have their weekly rates increased from £184.03 to £187.18.  

Statutory Sick Pay (SSP) will increase from £116.74 to £118.75.  

Additionally, the earnings threshold for these statutory payments will rise from £123 to £125 per week.  

Preparing for the changes 

Employers should take the following steps to prepare for these upcoming changes: 

• Ensure that payroll software and processes are updated to accommodate the new rates and thresholds. 

• Account for the increased employment costs in financial planning and budgeting. 

• Inform employees about the forthcoming changes to pay rates and statutory entitlements. 

Need help managing your payroll and these updates as we enter the new tax year? Contact us today for professional advice.