APRIL 2025 – THE UNITED KINGDOM
STATUTORY CHANGES FOR THE 2025/2026 TAX YEAR
It is important that employers note the following:
Statutory changes effective 6 April 2025
Following the delivery of the Autumn Budget on 30 October 2024, the Finance Act 2025 received Royal Assent on 20 March 2025, bringing the announced tax changes into law.
An overview of all the tax legislation and rates are summarised below.
Personal allowance
The standard employee personal allowance for the 2025/2026 tax year in England, Northern England, Scotland and Wales remains unchanged as follows:
- £242 per week
- £1,048 per month
- £12,570 per year
Where the income is above £100,000, the personal allowance reduces by £1 for every £2 of income above the £100,000 limit. This reduction applies irrespective of date of birth.
Tax rates
The tax rates for England, Northern England and Wales remain the same, but those for Scotland have changed.
The Scottish Budget introduced income tax policy changes aimed at reducing the tax burden for lower-income earners by adjusting the bands as follows:
The higher, advanced and top rate thresholds will remain frozen until at least the 2026/27 tax year.
National Insurance Contributions (NIC)
One of the key tax increases employers must prepare for is the rise in National Insurance Contributions on employee wages.
The updated NIC changes for employers, effective from 6 April 2025, are as follows:
- NIC Rate Increase – the employer NIC rate has increased from 13.8% to 15% (an increase of 1.2%).
- Threshold Adjustment – the threshold for employer NIC contributions has reduced from £9,100 to £5,000.
Class 1 National Insurance thresholds
National Insurance deductions can only be made on earnings above the lower earnings limit.
Class 1 National Insurance (primary) contribution rates
The Class 1 National Insurance rates for employees for the 2025 to 2026 tax year remain the same.
Class 1 National Insurance (secondary) contribution rates
The updated Class 1 National Insurance rates for employers for the 2025 to 2026 tax year are as follows:
Student loan thresholds
The government has announced the following updated student loan repayment thresholds for the 2025/2026 tax year:
Company car advisory fuel rates
The following advisory fuel rates for the 2025/2026 tax year are used to work out mileage costs where company cars are provided to employees:
Petrol and LPG (Propane):
Diesel:
Electric
- From 1 December 2024, the advisory electric rate for fully electric cars is 7 pence per mile.
- Hybrid cars are treated as either petrol or diesel cars for advisory fuel rates.
National Minimum Wage and national Living Wage
Effective 1 April 2025, the rates for the National Living Wage (for individuals aged 21 and over) and the National Minimum Wage (for individuals of at least school leaving age), are:
Statutory maternity, paternity adoption, shared parental, parental bereavement and neonatal care pay
With effect from 6 April 2025, statutory maternity pay (SMP), maternity allowance, paternity pay (SPP), adoption pay (SAP), shared parental pay (SHPP), parental bereavement pay (SPBP) and statutory neonatal care pay (SNCP) were increased from £184.03 to £187.18 per week.
To qualify for these payments (other than maternity allowance), employees must earn above the lower earnings limit, which has been increased to £125 per week from 6 April 2025.
Statutory pay for eligible employees can be paid as follows:
Statutory Sick Pay rates
The weekly rate for statutory sick pay (SSP) has been increased from £116.75 to £118.75 per week, effective from 6 April 2025.
Apprenticeship Levy
The Apprenticeship Levy was replaced with a Growth and Skills Levy on April 2025. The new levy aims to provide businesses with greater flexibility in workforce training, allowing them to access a broader range of training offers.
The new levy is still calculated as 0.5% of an employer’s annual pay bill exceeding £3 million, with a £15,000 allowance to offset against it.
Official interest rate
The Official Rate of Interest (ORI) was increased from 2.25% to 3.75% on 6 April 2025. The ORI is used to determine the taxable value of:
- Employment-related loans.
- Certain employer-provided living accommodations.
HM Revenue and Customs (HMRC) has indicated that from April 2025 the ORI will change on a quarterly basis.
To view the Finance Act 2025, follow the link.
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