As the 2025–2026 tax year approaches, UK employers should prepare for a series of major changes to payroll rules, statutory payments, and tax thresholds. These updates—announced in the 2024 Autumn Budget and supported by official government guidance—affect Employer National Insurance Contributions (NICs), statutory leave payments, sick pay, and income tax bands. Employers are strongly encouraged to review these changes to remain compliant and manage their staffing costs effectively.

Employer National Insurance Contributions (NICs)

From 6 April 2025, several significant changes to Employer NICs will come into effect:

1. The secondary (employer) NIC threshold will be reduced from £9,100 to £5,000 per year, which means employers will start paying NICs for employees earning above this lower threshold.
2. The main employer NIC contribution rate will increase from 13.8% to 15%, raising the overall cost of employment.
3. The Employment Allowance—designed to help smaller businesses with their NIC bill—will increase from £5,000 to £10,500 per year.
4. The £100,000 eligibility cap for Employment Allowance will be removed. Previously, employers with NIC liabilities exceeding this figure were ineligible to claim; this restriction will no longer apply.

Statutory Sick Pay (SSP)

To further support employee wellbeing, the government is increasing Statutory Sick Pay from 6 April 2025:

1. SSP will rise from £116.75 per week to £118.75 per week.

Statutory Family-Related Pay Increases

From April 2025, multiple family-related statutory payments will be increased to better support employees on leave:

1. Statutory Maternity Pay (SMP) will increase from £184.03 to £187.18 per week, for up to 39 weeks.
2. Statutory Paternity Pay, Statutory Adoption Pay, Shared Parental Leave Pay, Parental Bereavement Leave Pay, and Neonatal Care Allowance will also be increased in line with the SMP uplift.

Income Tax Thresholds and Rates

Tax thresholds for 2025–2026 remain stable in most parts of the UK, but the structure varies by region:

In England, Wales, and Northern Ireland:

1. Personal Allowance: £12,570
2. Basic Rate (20%): Up to £37,700
3. Higher Rate (40%): £37,701 to £125,140
4. Additional Rate (45%): Over £125,140

In Scotland:

1. Starter Rate (19%): Up to £2,827
2. Basic Rate (20%): £2,828 to £14,921
3. Intermediate Rate (21%): £14,922 to £31,092
4. Higher Rate (42%): £31,093 to £62,430
5. Advanced Rate (45%): £62,431 to £125,140
6. Top Rate (48%): Over £125,140

National Insurance Thresholds for 2025–26

Employers and employees should note the following National Insurance thresholds:

1. Lower Earnings Limit (LEL): £125 per week / £6,500 annually
2. Primary Threshold (employees): £242 per week / £12,570 annually
3. Secondary Threshold (employers): £96 per week / £5,000 annually
4. Upper Earnings Limit: £967 per week / £50,270 annually

Emergency Tax Codes

From April 2025, the following emergency tax codes will apply:

1. 1257L W1
2. 1257L M1
3. 1257L X

Pension Auto-Enrolment Thresholds

For the 2025–26 tax year, employers must observe the updated pension auto-enrolment earnings thresholds:

1. Earnings trigger: £10,000 annually
2. Lower qualifying earnings threshold: £6,240 annually
3. Upper qualifying earnings threshold: £50,270 annually

Final Thoughts

These updates mark substantial shifts in payroll and employment costs for businesses across the UK. Employers should:

1. Adjust payroll systems to reflect new NIC rates and thresholds
2. Recalculate eligibility for Employment Allowance
3. Update internal policies and employee communications on statutory pay changes
4. Ensure accurate tax code application and pension contributions

Taking early action will help ensure smooth compliance and efficient workforce management in the upcoming tax year.