As we approach the end of the UK financial year, businesses must begin planning for the critical end of year tasks. Payroll and finance teams will need to ensure they are prepared for a seamless transition into the new financial period.
In our UK year-end guide, we explore the key aspects that businesses need to be aware of, delving into the changes to tax codes, payroll processing considerations and compliance updates.
Changes in Tax Codes, Thresholds, Rates from 6 April 2025
The beginning of a new financial year usually means changes in tax regulations. Businesses must review recent tax updates and changes to guidance, paying special attention to changes in deductions, credits, and thresholds, to ensure compliance.
Income tax
It has been established that income tax allowances, rates, and thresholds for England and Northern Ireland would remain frozen as of April 6, 2025.
| 2024/2025 | 2025/2026 | |
| Personal Allowance | £ 12,570 | £ 12,570 |
| Standard emergency tax code | 1257L | 1257L |
The Personal Allowance for anyone earning over £100,000 will be lowered by £1 for every £2 over £100,000 earned.
The personal tax-free allowance will remain frozen until April 2028, as stated in the Autumn statement of 2023. The status has been verified as frozen for April 2025.
There won’t be any expected general tax code increases as long as the personal tax exemption amounts remain frozen, as directed by form P9X authority.
Tax Rates and Bands
Rest of the United Kingdom (rUK: England and Northern Ireland with no prefix)
| 2024/2025 | 2025/2026 | |||
| Basic Rate (BR) | 20% | £ 1 – £ 37,700 | 20% | £ 1 – £ 37,700 |
| Higher Rate (D0) | 40% | £ 37,701 – £ 125,140 | 40% | £ 37,701 – £ 125,140 |
| Additional Rate (D1) | 45% | Over £ 125,140 | 45% | Over £ 125,140 |
Scotland (prefix S)
| 2024/2025 | 2025/2026 | |||
| Starter Rate | 19% (10%+9%) | £12,571 – £14,876 | 19% (10%+9%) | £12,571 – £15,397 |
| Basic Rate (SBR) | 20% (10%+10%) | £14,877 – £26,561 | 20% (10%+10%) | £15,398 – £27,491 |
| Intermediate Rate (SD0) | 21% (10%+11%) | £26,562 – £43,662 | 21% (10%+11%) | £27,492 – £43,662 |
| Higher Rate (SD1) | 42% (30%+12%) | £43,663 – £75,000 | 42% (30%+12%) | £43,663 – £75,000 |
| Advanced Rate (SD2) | 45% (30%+15%) | £75,001 – £125,140 | 45% (30%+15%) | £75,001 – £125,140 |
| Top Rate (SD3) | 48% (35%+13%) | Over £ 125,140 | 48% (35%+13%) | Over £ 125,140 |
Wales (prefix C)
The Welsh Assembly have announced that the tax rates would remain the same and inline with the English tax rates in the 2025/2026 tax year.
| 2024/2025 | 2025/2026 | |||
| Basic Rate (CBR) | 20% (10%+10%) | £ 1 – £ 37,700 | 20% (10%+10%) | £ 1 – £ 37,700 |
| Higher Rate (CD0) | 40% (30%+10%) | £ 37,701 – £ 125,140 | 40% (30%+10%) | £ 37,700 – £ 125,140 |
| Additional Rate (CD1) | 45% (35%+10%) | Over £ 125,140 | 45% (35%+10%) | Over £ 125,140 |
National Insurance
Employers will face increased National Insurance costs from April 6, 2025, with rates rising from 13.8 per cent to 15 per cent. The earnings threshold at which employers start paying this tax will drop significantly from £9,100 per year to £5,000
- Employment Allowance
The Employment Allowance will increase from £5,000 to £10,500 from April 2025.
Class 1 Earnings Band
The thresholds and limits remain frozen for April 2024 with the secondary threshold being frozen until April 2028:
| Threshold/limit | Weekly | Monthly | Annual |
| Lower Earnings Limit (LEL) | £ 125 | £ 542 | £ 6,500 |
| Primary Threshold (PT) – directors | £ 242 | £ 1,048 | £ 12,570 |
| Primary Threshold (PT) – non-directors | |||
| Secondary Threshold (ST) | £ 96 | £ 758 | £ 5,000 |
| Freeports and Investment Zone Upper Secondary Threshold (FUST) | £ 481 | £ 2,083 | £ 25,000 |
| Upper Secondary Threshold (UST) | £ 967 | £ 4,189 | £ 50,270 |
| Apprentice Upper Secondary Threshold (AUST) | |||
| Veterans Upper Secondary Threshold (VUST) | |||
| Upper Earnings Limit (UEL) |
* Please be aware that the PT/ST/FUST/AUST/UST/VUST/UEL for 2/4 weekly is not always a multiple of the weekly value because rounding requirements for tax law and NI law differ. Nevertheless, the LEL, PT, ST, and FUST are coincidentally multiples of the weekly values for this tax year. Throughout the course of four weekly pay periods, the UST, AUST, VUST, and UEL remain non-multiples.
Class 1 Contribution Rates
Beginning on April 6, 2024, the following will be applicable to both directors and workers (each using an alternate annual method):
| Primary Contributions (Employee) | Secondary Contributions (Employer) | ||||||||
| A/F/H/M/N/V | B/E/I | C/K/S | D/J/L/Z | X | A/B/C/J | H/M/V/Z | D/E/F/I/K/L/N/S | X | |
| Below LEL | Nil | ||||||||
| LEL to PT | 0% | Nil | 0% | Nil | N/A | ||||
| PT to UEL / UST / AUST | 10% | 3.85% | 2% | ||||||
| LEL to ST | N/A | 0% | 0% | 0% | Nil | ||||
| FUST to UEL / UST / AUST / VUST | 13.8% | ||||||||
Class 1A and Class 1B Contribution Rates
Class 1A (Termination and Sporting Testimonials), Class 1A (Benefit in Kind (BIK)) and Cass 1B (PAYE Settlement Arrangements (PSA)) have both increased to 15%.
Statutory Payments
Family Related Leave
An increase has been confirmed for the statutory payment threshold and rates for weeks of statutory payment that are due in the new tax year.
| Rates | 2023/2024 (for whole weeks commencing from Sunday 6th April 2025) | 2024/2025 (for whole weeks commencing from Sunday 7th April 2024) |
| Earnings threshold | £ 125.00 per week | £ 123.00 per week |
| Standard rate for SMP, ShPP, SPP, SAP, SPBP | £187.18 per week or 90% of average weekly earnings (whichever is the lower) | £ 184.03 per week or 90% of average weekly earnings (whichever is the lower) |
| Higher rate for SMP/SAP | 90% of average weekly earnings | 90% of average weekly earnings |
Sickness
Changes to Statutory sick pay from 6 April:
| Rates | 2023/2024 | 2024/2025 |
| Earnings threshold | £ 123.00 per week | £ 125.00 per week |
| Standard rate | £ 116.75 per week | £118.75 per week |
Pension Auto-enrolment
The Secretary of State has considered all review factors against the analysis and has decided to maintain the LEL at the 2024/2025 level. The UEL has also been maintained at the same level as the 2024/2025 threshold.
| Annual values | PRP starting from 6th April 2024 | PRP starting from 6th April 2025 |
| Lower level of qualifying earnings | £ 6,240 | £ 6,240 |
| Earnings trigger for automatic enrolment | £ 10,000 | £ 10,000 |
| Upper level of qualifying earnings | £ 50,270 | £ 50,270 |
National Minimum wage and National Living Wage
The UK government have increased the minimum wage for the 2025/2026 tax year
| Age | Hourly Rate | Increase (£) | Increase (%) |
| 21+ | £12.21 | £0.77 | 6.47 |
| 18-20 | £10.00 | £1.40 | 16.3 |
| Under 18 | £7.55 | £1.15 | 18.0 |
| Apprentice under 19 or over 19 and in the first year of apprenticeship |
£7.55 | £1.15 | 18.0 |
Student loans
The thresholds at which employees start to pay student loans for Plan 1 and 2 have increased.
Any changes to Plan 4 and the student loan threshold are yet to be announced.
The table below shows the new thresholds:
| Plan Type | Rate | Annual Threshold 2024/2025 | Annual Threshold 2025/2026 |
| Plan 1 | 9% | £24,990 | £26,065 |
| Plan 2 | 9% | £27,295 | £ 28,470 |
| Plan 4 | 9% | £31,395 | To be confirmed |
| Post Graduate Loan | 9% | £21,000 | £21,000 |
Payroll Processing Considerations
For businesses, payroll processing is a critical component of year-end activities. Ensure that all employee records are up-to-date and assess any changes in payroll tax rates. Be mindful of compliance with labour laws and consider conducting thorough audits to identify and rectify any discrepancies. Additionally, communicate clearly with employees regarding year-end bonuses, benefits, and any changes to payroll procedures. This transparency promotes trust and reduces the likelihood of misunderstandings.
- April 5th: The tax year ends
This date signals the end of the 2024-2025 tax year. It is advisable for you to assess your tax and financial situation before this deadline, taking into account both personal and business planning considerations. By doing this, you can determine whether you are eligible for any tax benefits, allowances, or reliefs. April 5th is the deadline for:
- Pension contributions, which qualify for tax relief in the 2024/25 tax year.
- Capital Gains Tax exemption, the final day to use the CGT, tax-free annual allowance for 2024/2025.
- Benefit-in-kind, the last day to register for benefit-in-kind payroll benefits beginning in 2025-2026.
Neonatal care leave and pay
Neonatal Care Leave will apply to parents of babies who are admitted into neonatal care up to 28 days old and who have a continuous stay in hospital of 7 full days or longer. These measures will allow eligible parents to take up to 12 weeks of leave (and, if eligible, pay) on top of any other leave they may be entitled to, including maternity and paternity leave.
Neonatal Leave is a day-one right.
In order to qualify for Neonatal leave (NCL) the following conditions must be met:
- You must be an employee
- The baby must be born on or after 6th April 2025
- At the birth of the baby, you must be the baby’s parents, intended parents (in relation to surrogacy) or partner (see definition below) to the baby’s mother and you must have or expect to have responsibility for raising the child (similar rules apply in relation to adoption).
- The newborn must be admitted to neonatal care within the first 28 days of birth and must remain in neonatal care for at least 7 continuous days. However, the first period of 7 days begins with the day after the day your baby first receives neonatal care which effectively means that the newborn must spend 8 days in neonatal care before you will become entitled to leave.
- Neonatal care leave must be taken to provide care for the baby
- Neonatal care leave must be taken in blocks of a week
HMRC also have a helpful page on running payroll in general from a tax task perspective; Running payroll: Overview – GOV.UK (www.gov.uk)
Compliance Updates
Regulatory compliance is constantly evolving, and year-end marks an opportune time to review and update your business practices. Check for any modifications in industry-specific regulations, licensing requirements, and environmental standards. Conduct a comprehensive compliance audit to identify areas that may need attention and establish a plan to address any shortcomings. Staying ahead of compliance issues is essential for avoiding legal complications and maintaining the integrity of your business operations.
The financial year-end is a critical period that demands careful attention to detail. By staying informed about updates to tax codes, addressing payroll considerations, and ensuring compliance with changes, you can pave the way for a seamless transition.
Navigating the complexities of year-end can be daunting, but you don’t have to go it alone – we’re here to support you along your payroll journey.