Payroll Changes from April 2025: What You Need to Know
From April 2025, significant payroll changes will come into effect, impacting businesses of all sizes. Whether it’s adjustments to National Insurance, increased statutory payments, or new rules for reporting Benefits in Kind (BiKs), staying informed is crucial. Here’s a clear breakdown of the changes and what they mean for your business.
National Insurance Contributions (NICs): Higher Rates, Lower Thresholds
Key changes:
- Secondary Class 1 NIC Rate: Increases from 13.8% to 15%.
- Secondary Threshold: Drops from £9,100 to £5,000.
- Employment Allowance: Rises to £10,500, with the eligibility threshold removed.
What this means for employers:
The higher NIC rate will increase employer costs, but the enhanced Employment Allowance provides some relief—especially for smaller businesses.
Minimum Wage Updates: Higher Rates for All Age Groups
From April 1, 2025:
- 18–20-year-olds: Minimum wage increases to £10/hour.
- 16–17-year-olds: Minimum wage rises to £7.55/hour.
- Over 21s: National Living Wage increases to £12.21/hour.
What this means:
Employers will need to adjust payroll systems to reflect these changes. Businesses that employ young staff or minimum wage earners should budget for higher payroll costs.
Statutory Payments: Increases for Leave and Sick Pay
Key changes:
- Statutory Sick Pay (SSP): Rises to £118.75 per week.
- Statutory Maternity Pay and Family Leave Pay: Increases to £187.18 per week.
- Lower Earnings Limit: Adjusted to £125 per week.
What this means:
These updates will ensure employees on statutory leave receive higher payments. Employers need to plan for the increased costs when processing payroll.
Benefits in Kind (BiKs): Real-Time Reporting Required
Mandatory Payrolling (From April 2026):
- Most BiKs (except employment-related loans and accommodation) must be reported through payroll software in real-time.
- Voluntary payrolling is available for employment-related loans and accommodation until mandatory rules take effect.
Key requirements:
- BiK taxable values must be reported accurately during the tax year.
- Corrections can be made during the year or via an end-of-year adjustment process.
What this means:
Employers need robust payroll systems to comply with these requirements. While HMRC aims to simplify the process, businesses may face an adjustment period.
Electric Vehicles (EVs) and Salary Sacrifice: Gradual BiK Rate Increases
Changes to BiK rates for EVs:
- 2% in 2025.
- Incremental increases to 7% by 2028 and 9% by 2029.
What to consider:
EVs remain tax-efficient compared to petrol or hybrid cars, but businesses should factor in the rising BiK rates when offering salary sacrifice schemes.
Your can read more about how Car Salary Sacrifice works here.
Additional Updates: Tax Allowances and Returns
Married Couples and Blind Person's Allowances:
Increase by 1.7% from April 6, 2025.
Tax Returns for High Earners:
From the 2024/25 tax year, high earners on PAYE with annual incomes below £150,000 won’t need to file a tax return unless they have additional income streams.
Preparing for April 2025: Your Next Steps
- Update Payroll Systems: Ensure your software is ready for the new NIC rates, wage updates, and statutory payment changes. If you use a payroll service provider, they should manage these updates seamlessly.
- Review Benefits in Kind: Familiarize yourself with HMRC’s real-time reporting requirements for BiKs. Planning ahead will help you stay compliant.
- Communicate with Employees: Inform your staff about changes to wages, statutory payments, and their total remuneration packages.
- Seek Professional Advice: If you’re unsure about how these updates affect your business, consulting a payroll professional can save time and ensure compliance. Contact us (Payroll Proffesionals - Basded In Dartford)
Need Help Navigating Payroll Changes?
At Blue Rocket Accounting, we’re here to help. Our payroll experts can guide you through these updates and ensure your systems are ready for the changes.
Contact us today to learn more about managing payroll efficiently.
It’s not rocket science—it’s just great accounting!
Read More About Payroll
Check out these helpful blogs to learn more:
- Why A Payroll Review is Always a Good Idea | Blue Rocket
- Payroll | Outsource your Payroll, CIS and P11Ds
- Payroll. A Compliance Guide for SMEs | Blue Rocket
