New for 2025-26
There are a number of changes to the rules and rates that will affect payroll for 2025-26 and this guide provides details of some of them. Payroll Manager is automatically updated to include each of these changes. We would recommend that you read the latest editions of the HMRC Employer Bulletin (www.hmrc.gov.uk/payerti/forms-updates/employer-bulletin/index.htm ) which cover many of these items in greater detail. Please also see the GOV.UK document Rates and thresholds for employers 2025-26 which gives details of National Insurance rates and thresholds, minimum wage rates, etc.
- Employee Tax codes for 2025-26
- Income tax rates and thresholds in England, Northern Ireland, Wales and Scotland
- National Insurance Contributions
- Employment Allowance
- Auto Enrolment Pensions – Qualifying Earnings thresholds
- New rates of Statutory Pay
- National Minimum wage increases
- Student Loan rates and thresholds – Plan 1, Plan 2, Plan 4 (Scotland) and Postgraduate Loans
- Statutory Neonatal Care Pay
- Freeport / Investment Zone Workplace Postcode reporting requirement
It is possible to view (and print, if you wish) all of the relevant rates and thresholds by clicking ‘Analysis‘ then ‘Tax & NIC rates‘ from the main menu of the Payroll Manager software. The ‘Layout‘ selector at the top of the report allows you to select the relevant year.
1. Employee Tax codes for 2025-26
HMRC have announced that there will be NO uplifts of tax codes for tax year 2025-26. The ‘standard/emergency’ tax code for 2025-26 remains at 1257L (S1257L in Scotland, C1257L in Wales).
The HMRC help sheet www.hmrc.gov.uk/helpsheets/p9x.pdf gives further guidance on Tax Codes.
2. Income tax rates and thresholds for 2025-26
England, Wales and Northern Ireland
The standard employee personal allowance for the 2025 to 2026 tax year is:
- £242 per week
- £1,048 per month
- £12,570 per year
Tax rates for England, Wales and Northern Ireland remain frozen at 2024-25 levels. The rates for 2025-26 are as follows:
Tax rates above Personal Allowance:
| Basic tax rate | 20% | Up to £37,700 |
| Higher tax rate | 40% | From £37,701 to £125,140 |
| Additional tax rate | 45% | Above £125,140 |
Scotland
The standard employee personal allowance for the 2025 to 2026 tax year is:
- £242 per week
- £1,048 per month
- £12,570 per year
The bands to which the various Scottish Tax rates apply have been changed slightly from 2024-25. The rates for 2025-26 are as follows:
Tax rates above Personal Allowance:
| Starter tax rate | 19% | Up to £2,827 |
| Basic tax rate | 20% | From £2,828 to £14,921 |
| Intermediate tax rate | 21% | From £14,922 to £31,092 |
| Higher tax rate | 42% | From £31,093 to £62,430 |
| Advanced tax rate | 45% | From £62,431 to £125,140 |
| Top tax rate | 48% | Above £125,140 |
A full list of tax rates and thresholds can be found at Rates and thresholds for employers 2025 to 2026 – GOV.UK (www.gov.uk)
Payroll Manager will automatically apply the correct rate/ threshold for income tax according to the tax code assigned to each employee.
3. National Insurance Contributions
The rates and thresholds for the calculation of employee (primary) NIC remain unchanged from 2024-25, although the ‘Lower Earnings Limit’ (LEL) has increased slightly to £125/week.
There has been a major change to employers’ (secondary) NIC, with the Secondary Threshold (ST) being reduced from £175 /week to £96 /week. The rate of employers’ NIC has also been raised from 13.8% in 2024-25 to 15.0% in 2025-26.
The table below shows the National Insurance bands for 2025-26.
| Lower Earnings Limit (LEL) | Primary Threshold (PT) | Secondary Threshold (ST) for Employer NIC | Upper Earnings Limited (UEL) | |
| Weekly | 125 | 242 | 96 | 967 |
| 2-Weekly | 250 | 484 | 193 | 1,934 |
| 4-Weekly | 500 | 967 | 385 | 3,867 |
| Monthly | 542 | 1,048 | 417 | 4,189 |
| Directors Annual | 6,500 | 12,570 | 5,000 | 50,270 |
These changes mean that many employers may see an increase in the amount of employer NICs due to HMRC in each tax period from April 2025. The increase in the available Employment Allowance for tax year 2025-26 (see point 4, below) may serve to offset some of these increases.
Our guide to Employer National Insurance Contribution changes from April 2025 gives some examples of how these changes may affect a typical payroll.
A full list of NIC rates can be found at Rates and thresholds for employers 2025 to 2026
Payroll Manager will automatically apply the correct NIC bands and rates for each NIC category.
4. Employment Allowance
The Employment Allowance (EA) will be increased from £5000 in 2024-25 to new maximum level of £10,500 in 2025-26.
Also, the restriction which meant that employers with a NIC liability of more than £100,000 in the tax year immediately prior to the year were unable to claim the EA has been removed.
See our guide to the Employment Allowance for more details of how Payroll Manager handles the Employment Allowance.
The GOV.UK web page Changes to the Class 1 National Insurance Contributions Secondary Threshold, the Secondary Class 1 National Insurance contributions rate, and the Employment Allowance from 6 April 2025 – GOV.UK gives further information.
5. Auto Enrolment Pensions – Qualifying Earnings thresholds
The 2025-26 Auto Enrolment Qualifying Earnings thresholds remain unchanged from the 2024-25 levels.
- The Lower level of Qualifying Earnings remains at £120 per week / £520 per month for 2025-26
- The Upper level of Qualifying Earnings remains at £967 per week / £4,189 per month for 2025-26
- The ‘trigger point’ (where employees need to be automatically enrolled) remains at £10,000 per year.
The minimum contribution percentages relating to Automatic Enrolment pension schemes have not changed for 2025-26, and remain at 5% for the employee and 3% for the employer.
Payroll Manager will automatically apply these thresholds when calculating auto-enrolment pension contribution amounts .
6. New rates of Statutory Pay
- The rate for Statutory Sick Pay (SSP) is £118.75 per week from April 2025 (the weekly rate was £116.75 in 2024-25).
- The standard rate of Statutory Maternity, Paternity, Adoption Pay, Shared Parental Pay, and Parental Bereavement Pay (SMP, SPP, SAP, ShPP, SPBP) is £187.18 from April 2024 (the weekly rate was £184.03 in 2024-25).
- The Lower Earnings Limit (LEL) for 2025-26 has risen to £125.00 (the LEL was £123.00 in 2024-25). The ‘LEL’ is the minimum amount an employee must earn in order to qualify for SSP, SMP etc..
Employers can currently reclaim 92% of employees’ Statutory Maternity, Statutory Paternity, Statutory Adoption, Statutory Parental Bereavement and Statutory Shared Parental Pay (and from April 2025, Statutory Neonatal Care Pay – see point 9, below). If a business has paid £45,000 or less in Class 1 National Insurance (ignoring any reductions like Employment Allowance) in the last complete tax year they can qualify for Small Employers Relief, and reclaim 100% of the Statutory Payment, plus an additional 3% compensation. From 6 April 2025, the rate of compensation will increase from 3% to 8.5%. Employers who qualify for Small Employers Relief will therefore be able to reclaim 108.5% from HMRC.
See the HMRC publication Rates and Thresholds for 2025-26 for more information.
Payroll Manager will automatically apply the correct rate of statutory pay.
7. National Minimum Wage increases.
The National Minimum wage rates are increasing from April 2025. The new hourly rates, applicable from 1 April 2025 are as follows:
- Aged 21 and above (national living wage rate) – £12.21
- Aged 18 to 20 inclusive – £10.00
- Aged under 18 (but above compulsory school leaving age) – £7.55
- Apprentices – £7.55
If you have employees that are subject to these minimums you should ensure that the correct rate is being paid from April 2025 onwards. Payroll Manager has a number of features to help with this – please see Minimum Wage and National Living Wage – Moneysoft
More information can be found on the following links:
National Minimum wage and Living wage rates
ACAS guide – when minimum wage increases apply
Minimum Wage and National Living Wage – Moneysoft
8. Student loan rates and thresholds – Plan 1, Plan 2, Plan 4 (Scotland) and Postgraduate loans.
From 6 April 2025:
- The threshold at which borrowers repay Student Loan Plan Type 1 loans rises from £24,990 to £26,065 per year – Type 1 loans are those issued to students before 2012. The rate remains at 9%.
- The threshold for Student Loan Plan Type 2 loans (issued after 2012) rises from £27,295 to £28,470 per year. The rate remains at 9%.
- The threshold for Student Loan Plan Type 4 loans (Scotland) rises from £31,395 to £32,745 per year. The rate remains at 9%.
- The threshold for Postgraduate Loans (PGL), remains at £21,000 per year, and the rate remains at 6%.
Payroll Manager will automatically apply the correct student loan repayment threshold and will include the correct plan type in the RTI details sent to HMRC.
Please see our guide on Student Loan Deductions for details of how to process student loan repayments in the software.
For more information please refer to the HMRC guide on Repaying your student loan
9. Statutory Neonatal Care Pay (SNCP).
SNCP is a new statutory allowance to be introduced in April 2025. It is for parents who have a child that requires neonatal care in the first 28 days following birth. Payment is made for a maximum of 12 weeks.
Due to the complexity of the rules surrounding the calculation and payment of SNCP, Payroll Manager does not calculate the amounts automatically. SNCP Recovery and Compensation are calculated and claimed by Payroll Manager via an EPS, once the amounts due to an employee have been entered. See our guide Statutory Neonatal Care Pay (SNCP)
10. Freeport / Investment Zone Workplace Postcode reporting requirement
From 6 April 2025, eligible employers operating in a designated Freeport or Investment Zone special tax site wishing to claim the employer NIC relief will be required to provide the workplace postcode for any eligible employees on a Full Payment Submission (FPS). See guides Freeports Employer NIC relief and Investment Zone Employer NIC relief (IZENR) for details of how to enter Workplace Postcodes into Payroll Manager.
Links
GOV.UK – Rates and Thresholds for 2025-26