April 2025 Payroll Changes: What UK Employers Need to Know
The start of the 2025/26 tax year means several important payroll changes have come into force in the UK. From increased wage rates to rising employer costs, these updates will impact how you manage payroll and budget for the year ahead.
We’re here to guide you through these changes and help you stay compliant, while supporting your business’s financial planning. Below is a summary of the key payroll updates in April 2025, along with advice on what steps to take:
1. National Minimum Wage (NMW) and National Living Wage (NLW) Increases
Effective from 1 April 2025
The government has announced large increases to both the National Minimum Wage (for those under 21) and National Living Wage (mandatory for those over 21). Employers must ensure their payroll systems are updated in time. The table below outlines the rate changes coming into place from the 1st of April:
What You Need to Do:
- Review your employee wage levels.
- Update payroll systems accordingly.
- Communicate changes clearly to your team.
More info: HMRC Website
2. Employer National Insurance (NI) Contribution Changes
Effective from 6 April 2025
As announced in the Autumn Budget, there are two major changes that will affect employer NI contributions comping into force for the start of the 2025 financial year:
- The employer NI rate will increase from 13.8% to 15%.
- The threshold for contributions will fall from £9,100 to £5,000.
Many businesses will experience a substantial rise in payroll expenses due to these changes, and 2025 is expected to be the most costly year on record for employers hiring minimum wage workers.
It’s important to note that the increase in employers’ National Insurance will not affect all businesses. In fact, some may benefit from the upcoming Employment Allowance offset, as mentioned in section 3.
What You Need to Do:
- Recalculate employer contributions based on the new threshold.
- Review workforce budgets and financial forecasts.
- Consider the impact on recruitment and salary negotiations.
- Check if your business is eligible for employment allowance to reduce costs (see point 3 below)
More info: UK Gov Website
3. Employment Allowance Update
Employment allowance allows certain employers to reduce their NI contributions and offset some of the anticipated payroll cost increases.
Prior to April 5 2025, you could only claim up to a maximum of £5,000 each tax year in employment allowance. But from 6 April 2025, the allowance is increasing to £10,500. The government estimates that these updates mean 865,000 employers will pay no NICs in 2025.
Additionally, the 2024 Autumn Budget announced the removal of a significant restriction: currently, employers that have incurred a secondary Class 1 NI liability of more than £100,000 in the previous tax year are not eligible to claim the allowance. This restriction will be removed from April 2025.
Important Notes:
- You’re still not eligible to claim the allowance if your business does more than half of its work in the public sector (e.g., local councils or NHS services), unless you’re a charity.
- This can’t be claimed if the company only has one director who is the only employee liable for secondary Class 1 NICs.
What You Need to Do:
- Review your eligibility under the new rules.
- Update your payroll systems to reflect the increased allowance.
- Incorporate the change into your budgeting and forecasting models
More info:Gov.UK Website - Employer Rates & Thresholds
4. Statutory Payment Rate Increases
Effective from 6 April 2025
Key statutory payments for sickness and other types of paid workplace leave are increasing:
- Statutory Sick Pay (SSP) will rise to £118.75 per week. The exact amount the person will receive depends on a number of factors such as their regular working hours, so please use the HMRC calculator for exact figures.
- Statutory payments for maternity, paternity, adoption, shared parental and bereavement leave will also see increases.
- A new neonatal care leave policy is coming into effect, meaning that parents of babies who are admitted into neonatal care up to 28 days old are eligible for paid leave.
What You Need to Do:
- Update payroll software with new statutory payment rates.
- Make sure HR and finance teams are informed.
More info: Gov. UK Statutory Pay Rates
5. HMRC Scrutiny and Compliance Focus
Employers should be cautious when paying at or near the National Minimum or Living Wage, particularly if using salary sacrifice schemes or managing salaried employees who may work additional unpaid hours. HMRC is increasing scrutiny in these areas to check pay for employees does not fall below the NMW/NLW and plan to penalise companies accordingly.
What You Need to Do:
- Regularly audit pay structures.
- Ensure clear and accurate timekeeping records.
Concerned About Payroll Updates? We Can Help!
With several key payroll changes coming into force in 2025, you’ll need to double check systems, budgets, and employment practices are all up-to-date.
If you’d like support reviewing your payroll process, forecasting payroll costs, or ensuring compliance with the latest rules, Linggard and Thomas can help. We are Newquay-based chartered accountants with a team of payroll specialists that can empower your business to succeed.
Contact us today to arrange a payroll health check and keep your business compliant with financial legislation in 2025 and beyond.
