Roundup of payroll changes 2025/26: everything you need to know

6 April is fast approaching – and that means that payroll professionals are gearing up for tax year end. It’s one of the busiest times of the year, and every minute is precious right now. So why don’t we save you some time by giving you the lowdown on the legislative and regulatory changes for the 2025/26 tax year? That way you can focus on what really matters: getting your people paid.

Download our full tax year 2025/26 guide

Payroll changes 2025/26: what you need to know

We’ve got the roundup of payroll changes 2025/26 – from tax thresholds to statutory payments – in our guide below.

Prefer a proper teaching session? We’ve got you. Watch the webinar below, hosted by our resident payroll gurus Claire Warner, regulatory analyst, and Amanda Barnden, sales manager.

Tax thresholds

UK (including Welsh and excluding Scottish) tax thresholds are as follows:

	Taxable earnings banding from	Taxable earnings banding to	Tax payable
Basic	£1	£37,700	20%
Higher	£37,701	£125,140	40%
Additional	Above £125,140	Unlimited	45%

There’ll be no change to the standard tax code (1257L). You should also keep these other thresholds in mind:

Personal Allowance: £12,570 (frozen until 2027/28)
Personal Allowance income limit: £100,000
Married Couple’s Allowance (for those born before 06/04/1935): £4,360 minimum, £11,270 maximum
Marriage Allowance: £1,260
Blind Person's Allowance: £3,130

Scottish tax thresholds

Scottish tax thresholds differ from the rest of the UK. They are as follows:

	Taxable earnings banding from	Taxable earnings banding to	Tax payable
Starter	£1	£2,827	19%
Basic	£2,828	£14,921	20%
Intermediate	£14,922	£31,092	21%
Higher	£31,093	£62,430	42%
Advanced	£62,431	£125,140	45%
Top	Above £125,140	Unlimited	48%

The starter, basic and intermediate rates have increased since last year, but the higher, advanced and top bandings remain unchanged.

National Insurance thresholds

Threshold/limit

Earnings per week/month/year

Lower Earnings Limit (LEL)

£125 per week

£542 per month

£6,500 per year

Primary Threshold (PT)

£242 per week

£1,048 per month

£12,570 per year

Secondary Threshold (ST)

£96 per week

£417 per month

£5,000 per year

Upper Earnings Limit (UEL)

Upper Secondary Threshold for Under 21-year-olds

Apprentice Upper Secondary Threshold (AUST)

Veteran's Upper Secondary Threshold (VUST)

£967 per week

£4,189 per month

£50,270 per year

Freeport Upper Secondary Threshold (FUST)

Investment Zone Upper Secondary Threshold (IZUST)

£481 per week

£2,083 per month

£25,000 per year

National Insurance employee rates

Use	LEL to PT	PT to UEL	Above UEL
Standard category	0%	8%	2%
Married woman and widows - who are entitled to pay reduced NI rate	0%	1.85%	2%
Employees over State Pension Age (SPA)	NIL	NIL	NIL
Apprentices under 25	0%	8%	2%
Deferred NI	0%	2%	2%
Under 21s	0%	2%	0%
Eligible veterans	0%	2%	0%
Employees who have no NI liability	NIL	NIL	NIL
Deferred NI (under 21s)	0%	2%	0%

National Insurance employer rates

Use	LEL to ST	ST to UEL	Above UEL
Standard category	0%	15%	15%
Married woman and widows - who are entitled to pay reduced NI rate	0%	15%	15%
Employees over State Pension Age (SPA)	0%	15%	15%
Apprentices under 25	0%	0%	15%
Deferred NI	0%	15%	15%
Under 21s	0%	0%	15%
Eligible veterans	0%	0%	15%
Employees who have no NI liability	NIL	NIL	NIL
Deferred NI (under 21s)	0%	0%	15%

National Insurance rates and categories: Freeport and Investment Zone employers

Use	Employee	Employer	Employee	Employer	Employee	Employer	Employer
Use	LEL to PT	LEL to ST	PT to UEL	ST to FUST/ IZUST	Above UEL	FUST/IZUST to UEL	Above the UEL
Freeport employers
Standard Category	0%	0%	8%	0%	2%	15%	15%
Married woman and widows who are entitled to pay reduced rate NI	0%	0%	1.85%	0%	2%	15%	15%
Employees over State Pension Age (SPA)	NIL	0%	NIL	0%	NIL	15%	15%
Deferred NI	0%	0%	2%	0%	2%	15%	15%
Investment Zone employers
Standard Category	0%	0%	8%	0%	2%	15%	15%
Married woman and widows who are entitled to pay reduced rate NI	0%	0%	1.85%	0%	2%	15%	15%
Employees over State Pension Age (SPA)	NIL	0%	NIL	0%	NIL	15%	15%
Deferred NI	0%	0%	2%	0%	2%	15%	15%

Employment Allowance (EA)

EA allows companies that are eligible to reduce their NI liability. It will increase to £10,500 from April 2025 – this is up from the current £5,000. The current cap of £100,000 NIC liability in the previous tax year for eligibility will be removed, allowing more employers, who are otherwise eligible, to be able to claim the £10,500 allowance. You can claim via EPS.

Most businesses/charities can apply for Employment Allowance, except if they are a public body or a business whose activities wholly or mainly involve the performance of functions which are of a public nature.

All other eligibility criteria remain unchanged:

You can claim if you're a business or charity, or a connected company (only one can claim). You can only claim against one payroll if employer has multiple payrolls
You can't claim if you're a public body or your business is doing more than 50% of its work in the public sector (unless you're a charity), if the company only has one director and they're the only employee subject to NIC
You can't claim if there's a single director only payroll
Certain other employees must be excluded – like those working under IR35 and any employees employed for household/domestic work (eg nanny or gardener)

Statutory Sick Pay (SSP)

The SSP is as follows:

Daily rates	Days in week	1 day to pay	2 days to pay	3 days to pay	4 days to pay	5 days to pay	6 days to pay	7 days to pay
£16.964	7	£16.97	£33.93	£50.90	£67.86	£84.83	£101.79	£118.75
£19.792	6	£19.80	£39.59	£59.38	£79.17	£98.96	£118.75
£23.750	5	£23.75	£47.50	£71.25	£95.00	£118.75
£29.688	4	£29.69	£59.38	£89.07	£118.75
£39.583	3	£39.59	£79.17	£118.75
£59.375	2	£59.38	£118.75
£118.750	1	£118.75

Table created by the CIPP

We can only denote values up to three decimals

Other statutory payments and deductions

Payment type	Rate
Maternity pay	£187.18*
Paternity pay	£187.18*
Adoption pay	£187.18*
Shared parental pay	£187.18*
Parental bereavement pay	£187.18*
Neonatal care pay	£187.18*
Sick pay	£118.75

*or 90% of the employee’s average weekly earnings (AWE), whichever is lower

National Minimum Wage rates

Age		% increase
21 and over (NLW)	£12.21	6.7%
18 – 20	£10.00	16.3%
16 – 17	£7.55	18%
Apprentice	£7.55	18%
Accommodation Offset	£10.66 Daily £74.62 Weekly	6.7%

Small Employers Relief (SER)

The SER, otherwise known as the compensation rate, has been increased to 8.5% (108.5%). This rate has previously been held at 3% (103%) since 2011.

The threshold remains unchanged at £45,000.

A small employer is defined as where the total NI contributions were £45,000 or less in the last complete tax year, before the employee’s qualifying/matching week.

The 8.5% compensation rate will apply to all Statutory Parental Payments.

Student loans

	Annual threshold	Rate
Plan 1	£26,065	9%
Plan 2	£28,470	9%
Postgraduate	£21,000	6%
Plan 4 (Scotland)	£32,745	9%
Plan 5 (England) from April 2026*	£25,000	9%

*Plan 5 relates to new students from September 2023, and processing will start from April 2026

Scottish Earnings Arrestments

Scottish Earnings Arrestments are usually reviewed every 3 years. However, this pattern has been broken and these changes are set to come into effect 6 April 2025. They were previously updated in 2023.

Any calculation of the Scottish Arrestment and Conjoined Earnings Arrestments must be based on the revised tables.

Daily earnings
Net earnings	Deduction
Not above £24.66	Nil
Above £24.66 but below £49.32	£0.33 or 15% of earnings exceeding £24.66 whichever is greater
Above £49.32 but below £82.19	£3.70 plus 20% of earnings exceeding £49.32
Above £82.19 but below £123.29	£10.27 plus 25% of earnings exceeding £82.19
Above £123.29	£20.55 plus 50% of earnings exceeding £123.29

Weekly earnings
Net earnings	Deduction
Not above £172.61	Nil
Above £172.61 but below £345.22	£2.30 or 15% of earnings exceeding £172.61 whichever is greater
Above £345.22 but below £575.37	£25.89 plus 20% of earnings exceeding £345.22 whichever is greater
Above £575.37 but below £863.06	£71.92 plus 25% of earnings exceeding £575.37
Above £863.06	£143.84 plus 50% of earnings exceeding £863.06

Monthly earnings
Net earnings	Deduction
Not above £750.00	Nil
Above £750.00 but below £1,500.00	£10.00 or 15% of earnings exceeding £750.00 whichever is greater
Above £1,500.00 but below £2,500.00	£112.50 plus 20% of earnings exceeding £1,500.00
Above £2,500.00 but below £3,750.00	£312.50 plus 25% of earnings exceeding £2,500.00
Above £3,750.00	£625.00 plus 50% of earnings exceeding £3,750.00

Official Rate of Interest

The Official Rate of Interest (ORI) is used to calculate the tax for employment related beneficial loans and some employment related living costs. The current Official Rate of Interest is 2.25%.

The Autumn Budget 2024 ended the previous commitment (from January 2000) not to increase the rate during the tax year.

The ORI may increase, decrease or be maintained throughout the year. This is effective from 6 April 2025.

The rate will be reviewed quarterly. Any rate changes will take effect on 6 April, 6 July, 6 October and 6 January.

This could impact the calculations for employment related loans and living accommodation – these are the two items that will not be subject to mandatory payrolling of benefits from April 2026.

Advisory fuel rates from 1 March 2025

These rates are revised/reviewed quarterly - on the 1st of March, June, September and December. They apply to employees using company cars when organisations:

Are reimbursing them for business travel in company cars – paying at higher rates (without evidence that fuel costs are higher) will mean treating the excess as taxable profit and earnings for Class 1 NIC
Need employees to repay the cost of fuel for private travel – employers don’t need to use these rates if they can show the employee is covering the full cost of private travel by paying at a lower rate

If the mileage rate paid is no higher than the AFR relevant to engine/fuel type there is no taxable profit or Class 1A NIC due.

Engine size	Petrol		LPG		Engine size	Diesel
	Dec – Feb	From Mar	Dec – Feb	From Mar		Dec – Feb	From Mar
Up to 1400 cc	12p	12p	11p	11p	Up to 1600 cc	11p	12p
1401 to 2000 cc	14p	15p	13p	13p	1601 to 2000	13p	13p
Over 2000 cc	23p	23p	21p	21p	Over	17p	17p
Electric	Continues to remain at 7p, last change was 1 Sept 2024 – reduced from 8p

Neonatal Care and Leave Act 2023

This was confirmed by the government on 20 January 2025 and will be effective from 6 April 2025. It applies to babies born on or after this date.

Entitlement is triggered where a child enters neonatal care within 28 days of birth and completes a minimum seven-day stay. Neonatal leave is a day one right but pay requires continuity of service/employment and earnings tests to be met.

It's earned in arrears. Therefore, the first seven days of a child in neonatal care can’t be taken as neonatal care leave. Other options could be to use emergency family leave, other statutory leave such as SPP, or annual leave (this can’t be enforced).

It's available to both parents in addition to other leave and pay entitlements, and must be taken in increments of one full week up to a maximum of the 12 weeks available.

The Neonatal Care (Leave and Pay) Act 2023 only applies to Great Britain. There is no legislation for its introduction in Northern Ireland – so care should be taken.

It's separated into two tiers:

Tier 1
Notice	Must be provided to the employer before the employee’s start time on the first day of absence in the week Or as soon as reasonably practicable following the child’s admission into neonatal care – and inform employer of the intention to take SNCL after the seven consecutive days’ qualifying period is completed Notice must be received within 28 days of the start of the leave period
Leave	Entitlement is gained retrospectively Leave is available whilst the child is receiving neonatal care and the week following discharge from care Must be taken in blocks of a minimum of one week, but there is no limit on the number of blocks If leave overlaps with pre-booked parental or other leave it can be paused and taken after the other leave

Tier 2
Notice	For one week’s leave, notice of at least 15 days must be given to the employer For more than two weeks of leave, notice is capped at four weeks Notice of pay must be given within 28 days of the start of the leave – same as tier 1
Leave	This tier covers any situation not covered by tier 1, eg when an employee is already on maternity leave Available from the second week following the child’s release from neonatal care up to 68 weeks following the child’s birth Must be taken as one continuous block of leave

To receive leave and/or pay for either tier one or tier two the following information must be provided to the employer:

Employee’s name
Date of child’s birth – or if applicable:
- The date of child’s placement with adopter/prospective adopter
- The date of the child’s entry into Great Britain to live with an overseas adopter
Date the child started to received neonatal care (or each date if multiple occasions)
The date the care ended (if it has)
A declaration that the employee meets the parental relationship criteria – if it’s the first time that notice is given
That the employee has cared/intends to care for the child during the period of leave the notice covers

So far there are no formal government forms equivalent to the SPP1.

Get payroll peace of mind

Phew – that’s a lot to take in. We wouldn’t blame you if you bookmarked this blog post to refer back to! Anything to give you payroll peace of mind.

And speaking of payroll peace of mind – we know that’s what you want to give to your people. After all, they rely on you to be accurately paid on time, every time. We can help with that – we’ve got payroll software you can trust. Our solutions are made to fit your unique needs, whether that’s outsourced payroll or payroll bureau services.

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