United Kingdom of Great Britain and Northern Ireland (UK)

Payroll obligations include income tax collected through PAYE, employee Class 1 NICs and employer Class 1 secondary NICs. Employers administer PAYE and employee NIC deductions and bear the employer NIC liability. Employees contribute NICs at a rate of 8% on monthly earnings between the Primary Threshold and the Upper Earnings Limit, and 2% on earnings above the Upper Earnings Limit. No NICs are due on earnings below the Primary Threshold. Employers are required to pay Class 1 NICs at an increased rate of 15% on employee earnings above £417 per month, known as the Secondary Threshold. Employers may also be liable for Class 1A NICs – charged at 15% on most taxable employee benefits such as company cars – and Class 1B NICs, also at 15%, which apply to items covered under PAYE settlement agreements, including certain staff benefits and expenses. Eligible employers can reduce their annual employer NIC liability through the Employment Allowance, which is set at £10,500 per year from April 2025 and is broadly available to most employers. These payroll taxes are essential for funding public services such as healthcare and pensions. Additionally, other payroll deductions can include student and postgraduate loan repayments and employee pension contributions under automatic enrolment rules. Larger employers may also be subject to the Apprenticeship Levy (sometimes referred to in policy discussions as a future Growth and Skills Levy), which is charged at 0.5% of an employer’s annual pay bill, less a £15,000 annual levy allowance. This generally creates a liability where the annual pay bill exceeds £3 million, subject to the rules for connected employers and charities, which share one levy allowance and supports workforce training and development. Employers are responsible for calculating, deducting, reporting and remitting these amounts accurately and on time, while maintaining full compliance with RTI reporting requirements.