Introduction of Differences Between Payroll Rates and Thresholds for the 2024/2025 and 2025/2026 Fiscal Years

Understanding the differences between the payroll rates and thresholds for the 2024/2025 and 2025/2026 fiscal years is essential for employers to stay compliant and manage payroll accurately. HMRC has confirmed updates to key areas, including PAYE tax, Class 1 National Insurance, and statutory payments such as Maternity, Paternity, Adoption, Shared Parental, Parental Bereavement Pay, Statutory Neonatal Care Pay, and Statutory Sick Pay (SSP).

This article highlights the most significant changes and compares the rates and thresholds between the two fiscal years. It will help ensure your payroll processes remain accurate and aligned with HMRC’s requirements.

Student loan and postgraduate loan recovery

Below is a comparison of the student loan and postgraduate loan thresholds, highlighting the changes and differences.

| Plan Type            | 2024/2025 | 2025/2026 | Difference  |
|----------------------|--------------------------------------------|--------------------------------------------|---------------------|
| Student Loan Plan 1  | £24,990 per year  | £26,065 per year  | +£1,075 per year   |
| Student Loan Plan 2  | £27,295 per year  | £28,470 per year  | +£1,175 per year   |
| Student Loan Plan 4  | £31,395 per year  | £32,745 per year  | +£1,350 per year   |
| Postgraduate Loan    | £21,000 per year  | £21,000 per year | No change          |
| Student Loan Deduction Rate | 9%   | 9%  | No change          |
| Postgraduate Loan Deduction Rate | 6%   | 6%   | No change

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Key Differences:

• Threshold Increases: All student loan plans (1, 2, and 4) have higher thresholds for 2025/2026, meaning employees will need to earn more before repayments start.

• Postgraduate Loan Threshold: Remains unchanged at £21,000 for 2025/2026.

• Deduction Rates: Both student loan and postgraduate loan deduction rates remain constant at 9% and 6%, respectively.

  
  
  

England and Northern Ireland

Below is a comparison of the tax thresholds and rates for England and Northern Ireland, highlighting the changes and differences to assist employers and payroll teams in staying compliant and informed.

| PAYE Tax Rate         | Rate of Tax | 2024/2025            | 2025/2026            |
|-----------------------|-------------|-----------------------|-----------------------|
| Basic Tax Rate        | 20%         | Up to £37,700        | Up to £37,700        |
| Higher Tax Rate       | 40%         | From £37,701 to £125,140 | From £37,701 to £125,140 |
| Additional Tax Rate   | 45%         | Above £125,140       | Above £125,140

| PAYE Tax Rate         | Difference  | 2024/2025            | 2025/2026            |
|-----------------------|-------------|-----------------------|-----------------------|
| Basic Tax Rate        | No change   | Up to £37,700        | Up to £37,700        |
| Higher Tax Rate       | No change   | From £37,701 to £125,140 | From £37,701 to £125,140 |
| Additional Tax Rate   | No change   | Above £125,140       | Above £125,140

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Key Differences England and Northern Ireland:

• No Change in Additional Rate Threshold: The additional tax rate threshold remains the same at £125,141 in 2025/2026 as it was in 2024/2025.

• No Change in Basic and Higher Rate Thresholds: The thresholds for the basic rate (up to £37,700) and higher rate (£37,701 to £125,140) also remain unchanged for 2025/2026.

• Tax Rates Remain Unchanged: The rates for all tax bands—20% for basic rate, 40% for higher rate, and 45% for additional rate—stay consistent for 2025/2026.

Scotland

Here is a detailed comparison of the tax thresholds and rates for Scotland, showcasing the updates and differences. These changes are essential for employers and payroll professionals to ensure accuracy and compliance.

| PAYE Tax Rate         | Rate of Tax | 2024/2025              | 2025/2026              |
|-----------------------|-------------|-------------------------|-------------------------|
| Starter Tax Rate      | 19%         | Up to £2,306           | Up to £2,827           |
| Basic Tax Rate        | 20%         | From £2,307 to £13,991 | From £2,828 to £14,921 |
| Intermediate Tax Rate | 21%         | From £13,992 to £31,092| From £14,922 to £31,092|
| Higher Tax Rate       | 42%         | From £31,093 to £62,430| From £31,093 to £62,430|
| Advanced Tax Rate     | 45%         | From £62,431 to £125,141| From £62,431 to £125,141|
| Top Tax Rate          | 48%         | Above £125,141         | Above £125,141

| PAYE Tax Rate         | Difference                  | 2024/2025              | 2025/2026              |
|-----------------------|-----------------------------|-------------------------|-------------------------|
| Starter Tax Rate      | Increased threshold by £521| Up to £2,306           | Up to £2,827           |
| Basic Tax Rate        | Increased range by £1,514  | From £2,307 to £13,991 | From £2,828 to £14,921 |
| Intermediate Tax Rate | Increased lower threshold  | From £13,992 to £31,092| From £14,922 to £31,092|
| Higher Tax Rate       | No change                  | From £31,093 to £62,430| From £31,093 to £62,430|
| Advanced Tax Rate     | No change                  | From £62,431 to £125,141| From £62,431 to £125,141|
| Top Tax Rate          | No change                  | Above £125,141         | Above £125,141

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Key Differences

• Increased Thresholds for Starter and Basic Rates:

  • The Starter rate threshold has risen from up to £2,306 in 2024/2025 to up to £2,827 in 2025/2026.

  • The Basic rate range expanded from £2,307 to £13,991 in 2024/2025 to £2,828 to £14,921 in 2025/2026, allowing employees to earn more before moving into a higher tax bracket.

• Adjusted Intermediate Rate Threshold:

  • The lower threshold for the Intermediate rate increased from £13,992 in 2024/2025 to £14,922 in 2025/2026, providing an extended range before entering the next tax band.

• No Changes to Higher, Advanced, or Top Rates:

  • The thresholds for the Higher rate (£31,093 to £62,430), Advanced rate (£62,431 to £125,141), and Top rate (above £125,141) remain unchanged for 2025/2026.
    
    
    

Wales

Below is an overview of the tax thresholds and rates for Wales, outlining the key updates and differences. These insights are crucial for employers and payroll teams to remain compliant and manage payroll effectively.

| PAYE Tax Rate   | Rate of Tax | 2024/2025 Earnings | 2025/2026 Earnings | Difference  |
|-----------------------|-------------|---------------------|---------------------|-------------|
| Basic Tax Rate   | 20%  | Up to £37,700  | Up to £37,700 | No change |
| Higher Tax Rate  | 40%  | £37,701 to £125,140| £37,701 to £125,140| No change|
| Additional Tax Rate  | 45% | Above £125,140  | Above £125,141 | No change

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Key Differences for Wales:

• No Changes to Additional Rate Threshold:

  • The Additional tax rate threshold remains the same at above £125,141 for both 2024/2025 and 2025/2026.

• No Changes to Basic and Higher Rate Thresholds:

  • The thresholds for the Basic rate (up to £37,700) and Higher rate (£37,701 to £125,140) also remain unchanged for 2025/2026.

• Tax Rates Remain the Same:

  • The tax rates for all bands—20% for basic rate, 40% for higher rate, and 45% for additional rate—are unchanged from the previous year.
    
    

Statutory Maternity, Paternity, Adoption, Shared Parental, Parental Bereavement, and Statutory Neonatal Care Pay Rates

The table below highlights the updated weekly rates for statutory payments for 2025/2026, including the introduction of Statutory Neonatal Care Pay (SNCP).

| Statutory Payment -Weekly Rate  | 2024/2025  | 2025/2026  | Increase  |
|-----------------------------------------|------------------------|------------------------|---------------------|
| SMP (Statutory Maternity Pay) | £184.03 | £187.18 | £3.15  |
| SPP (Statutory Paternity Pay) | £184.03 | £187.18 | £3.15  |
| SAP (Statutory Adoption Pay) | £184.03 | £187.18 | £3.15  |
| ShPP (Shared Parental Pay)| £184.03 | £187.18 | £3.15  |
| SPBP (Parental Bereavement Pay)| £184.03  | £187.18  | £3.15  |
| SNCP (Statutory Neonatal Care Pay) | N/A | £187.18 | Newly Introduced

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Key Differences for Statutory Payments

• Increase in Weekly Rates for Statutory Payments:

  • The weekly rate for remaining weeks across all statutory payments (e.g., SMP, SPP, SAP, ShPP, SPBP, and SNCP) has increased from £184.03 in 2024/2025 to £187.18 in 2025/2026.

  • This represents a £3.15 increase per week.

• No Changes to the Initial Weekly Rates for Statutory Maternity Pay (SMP) and Statutory Adoption Pay (SAP):

  • The first 6 weeks for SMP and SAP remain at 90% of the employee’s average weekly earnings for both years.

• Introduction of Statutory Neonatal Care Pay (SNCP):

  • Statutory Neonatal Care Pay is included in 2025/2026 with the same weekly rate of £187.18 or 90% of the employee’s average weekly earnings, whichever is lower.

Employer Recovering Statutory Payments from HMRC

Key Differences:

• No Changes in Recovery Rates:

  The recovery rates remain the same across both years:

  • 92% recovery for employers whose total Class 1 National Insurance contributions exceed £45,000 for the previous tax year.

  • 103% recovery for employers whose total Class 1 National Insurance contributions are £45,000 or lower for the previous tax year.

• Consistency Across Payments:

  The recovery rules continue to apply uniformly to SMP, SPP, ShPP, SAP, SPBP, and SNCP in both years.

This reflects that the support for employers in recovering statutory payments remains unchanged for 2025/2026.

Statutory Sick Pay (SSP)

Below is a comparison of the Statutory Sick Pay (SSP) rates and thresholds, highlighting the changes and differences.

| Number of Qualifying Days | 2024/2025  Daily Rate | 2025/2026 Daily Rate | Difference |
|---------------------------|-------------------------------|-------------------------------|------------|
| 7 days                   | £16.6785  | £16.9642  | +£0.2857   |
| 6 days                   | £19.4583   | £19.7916   | +£0.3333   |
| 5 days                   | £23.35  | £23.75  | +£0.40     |
| 4 days                   | £29.1875 | £29.6875 | +£0.50     |
| 3 days                   | £38.9166 | £39.5833 | +£0.6667   |
| 2 days                   | £58.375  | £59.375  | +£1.00     |
| 1 day                    | £116.75  | £118.75 | +£2.00

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Key Differences

Increase in Unrounded Daily Rates:

• All unrounded daily rates have been adjusted upwards for 2025/2026. For example:

  • The 7 qualifying days rate increased from £16.6785 in 2024/2025 to £16.9642 in 2025/2026.

• The increments reflect consistent adjustments across all qualifying days, ensuring fair compensation aligned with updated thresholds.