Payroll

Payroll Changes for Employers: UK 2025 to 2026

Elena Segura

Co-Founder

Jan 20, 2025

rates-and-thresholds-for-employers-2025-to-2026
rates-and-thresholds-for-employers-2025-to-2026
rates-and-thresholds-for-employers-2025-to-2026

Introduction of Payroll Changes for Employers for the Fiscal Year 2025 to 2026

The fiscal year 2025 to 2026 brings significant payroll changes for employers, as confirmed by HMRC. These updates, effective from 6 April 2025 to 5 April 2026, include new thresholds, rates, and statutory payment adjustments.

Employers must ensure their payroll systems are updated to reflect these changes. Accurate implementation will ensure compliance and guarantee correct contributions for both employees and employers.

In this guide, we provide a detailed breakdown of the key changes for the 2025/2026 fiscal year, including updates to PAYE tax, Class 1 National Insurance, and statutory payments. These statutory payments include Maternity, Paternity, Adoption, Shared Parental, Parental Bereavement Pay, and Statutory Neonatal Care Pay, as well as Statutory Sick Pay (SSP).

Student loan and postgraduate loan recovery

These are the new student loan and postgraduate loan recovery thresholds for 2025/2026. Ensure you record the relevant loan deductions in your payroll system. The software will automatically calculate and deduct the correct repayment amounts when an employee’s wages exceed the thresholds.

Below, we’ve outlined the thresholds.

| Plan Type            | Annual Threshold | Weekly   | 2 Weekly  | 4 Weekly  | Monthly   | Deduction Rate |
|----------------------|------------------|----------|-----------|-----------|-----------|----------------|
| Plan Type 1          | £26,065.00      | £501.25  | £1,002.50 | £2,005.00 | £2,172.08 | 9%             |
| Plan Type 2          | £28,470.00      | £547.50  | £1,095.00 | £2,190.00 | £2,372.50 | 9%             |
| Plan Type 4          | £32,745.00      | £629.71  | £1,259.42 | £2,518.84 | £2,728.75 | 9%             |
| Postgraduate Loan    | £21,000.00      | £403.84  | £807.69   | £1,615.38 | £1,750.00 | 6

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Income Tax Rates, Allowances and Thresholds

Here are the tax thresholds, rates, and codes. The Income Tax deducted by your payroll software is determined by employees' tax codes and the portion of their taxable income that exceeds their Personal Allowance.

England and Northern Ireland

The standard employee personal allowance for the 2025 to 2026 tax year is:

  • £242 per week

  • £1,048 per month

  • £12,570 per year


Below, we’ve outlined the thresholds.

| England and Northern Ireland PAYE Tax Rate | Rate of Tax | Annual Earnings the Rate Applies To (above the PAYE threshold) |
|:------------------------------------------:|:-----------:|:-------------------------------------------------------------:|
| Basic Tax Rate                             | 20%         | Up to £37,700                                                 |
| Higher Tax Rate                            | 40%         | From £37,701 to £125,140                                      |
| Additional Tax Rate                        | 45%         | Above £125,141


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Scotland

The standard employee personal allowance for the 2025 to 2026 tax year is:

  • £242 per week

  • £1,048 per month

  • £12,570 per year


Below, we’ve outlined the thresholds.

| Scotland PAYE Tax Rate| Rate of Tax | Annual Earnings the Rate Applies To (above the PAYE threshold) |
|-----------------------|-------------|----------------------------------------------------------------|
| Starter Rate          | 19%         | £1 – £2,827                                                   |
| Basic Rate            | 20%         | £2,828 – £14,921                                              |
| Intermediate Rate     | 21%         | £14,922 – £31,092                                             |
| Higher Rate           | 42%         | £31,093 – £62,430                                             |
| Advanced Rate         | 45%         | £62,431 – £125,140                                            |
| Top Rate              | 48%         | Above £125,141


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Wales

The standard employee personal allowance for the 2025 to 2026 tax year is:

  • £242 per week

  • £1,048 per month

  • £12,570 per year


Below, we’ve outlined the thresholds.

| Wales Tax Rate | Rate of Tax | Annual Earnings the Rate Applies To (above the PAYE threshold) |
|-----------------------|-------------|----------------------------------------------------------------|
| Basic Tax Rate        | 20%         | £1 – £37,700                                                  |
| Higher Tax Rate       | 40%         | £37,701 – £125,140                                            |
| Additional Tax Rate   | 45%         | Above £125,141


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

Statutory Maternity Pay (SMP)

The rates below reflect the updates for the 2025/2026 tax year:

| SMP Additional Insights          | 2025 to 2026 Rate                                                            |
|----------------------------------|------------------------------------------------------------------------------|
| Weekly rate for first 6 weeks    | 90% of the employee's average weekly earnings                                |
| Weekly rate for remaining weeks  | £187.18 or 90% of the employee's average weekly earnings, whichever is lower |

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Statutory Paternity Pay (SPP)

The rates below reflect the updates for the 2025/2026 tax year:


| SPP Additional Insights | 2025 to 2026 Rate                                           |
|---------------------|------------------------------------------------------------|
| Weekly rate         | £187.18 or 90% of the employee's average weekly earnings, whichever is lower |

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Statutory Adoption Pay (SAP)

The rates below reflect the updates for the 2025/2026 tax year:

| SAP Additional Insights    | 2025 to 2026 Rate                                           |
|----------------------------------|-----------------------------------------------------------|
| Weekly rate for first 6 weeks    | 90% of the employee's average weekly earnings             |
| Weekly rate for remaining weeks  | £187.18 or 90% of the employee's average weekly earnings, whichever is lower |

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Statutory Shared Parental Pay (ShPP)

The rates below reflect the updates for the 2025/2026 tax year:

| ShPP Additional Insights | 2025 to 2026 Rate                                           |
|---------------------|------------------------------------------------------------|
| Weekly rate         | £187.18 or 90% of the employee's average weekly earnings, whichever is lower |

Statutory Parental Bereavement Pay (SPBP)

The rates below reflect the updates for the 2025/2026 tax year:

| SPBP Additional Insights | 2025 to 2026 Rate                                           |
|---------------------|------------------------------------------------------------|
| Weekly rate         | £187.18 or 90% of the employee's average weekly earnings, whichever is lower |

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Statutory Neonatal Care Pay (SNCP)

The rates below reflect the updates for the 2025/2026 tax year:

| SNCP Additional Insights | 2025 to 2026 Rate                                           |
|---------------------|------------------------------------------------------------|
| Weekly rate         | £187.18 or 90% of the employee's 
  average weekly earnings, whichever is lower

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Employer Recovering Statutory Payments from HMRC

Employers can recover a proportion of statutory payments such as SMP, SPP, ShPP, SAP, SPBP, and SNCP from HMRC, depending on their total Class 1 National Insurance contributions for the previous tax year. The recovery rate ensures employers are supported when offering statutory payments.

| Employer Recovery Rates Criteria                                                              | Recovery Rate                                  |
|-----------------------------------------------------------------------|-----------------------------------------------|
| Total Class 1 National Insurance (employee and employer) is above £45,000 for the previous tax year | 92% of statutory payments can be recovered   |
| Total Class 1 National Insurance is £45,000 or lower for the previous tax year                     | 103% of statutory payments can be recovered

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Statutory Sick Pay (SSP)

The weekly Statutory Sick Pay (SSP) rate is the same for all employees. The specific amount paid per day will vary based on the number of ‘qualifying days’ the employee is scheduled to work each week. This ensures the payment accurately reflects their work pattern during their period of illness.


| Unrounded Daily Rates | Number of Qualifying Days in Week | 1 Day to Pay | 2 Days to Pay | 3 Days to Pay | 4 Days to Pay | 5 Days to Pay | 6 Days to Pay | 7 Days to Pay |
|------------------------|-----------------------------------|--------------|---------------|---------------|---------------|---------------|---------------|---------------|
| £16.9642              | 7                                 | £16.97       | £33.93        | £50.90        | £67.86        | £84.83        | £101.79       | £118.75       |
| £19.7916              | 6                                 | £19.80       | £39.59        | £59.38        | £79.17        | £98.96        | £118.75       | -             |
| £23.75                | 5                                 | £23.75       | £47.50        | £71.25        | £95.00        | £118.75       | -             | -             |
| £29.6875              | 4                                 | £29.69       | £59.38        | £89.07        | £118.75       | -             | -             | -             |
| £39.5833              | 3                                 | £39.59       | £79.17        | £118.75       | -             | -             | -             | -             |
| £59.375               | 2                                 | £59.38       | £118.75       | -             | -             | -             | -             | -             |
| £118.75               | 1                                 | £118.75

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To help UK employers better understand the impact of the 2025/2026 fiscal year changes, we have created a detailed article comparing the previous fiscal year with the current one. This comparison highlights key updates affecting payroll, taxation, and statutory payments, ensuring businesses can adapt seamlessly to the new regulations. Additionally, we emphasize how using payroll software designed for the UK can simplify these transitions by automating calculations, staying compliant with HMRC updates, and reducing administrative burdens. By exploring this resource, employers can gain clarity on the changes and ensure their payroll processes remain efficient and accurate.

FAQs

  1. When do the 2025/2026 payroll changes come into effect?

    The changes are effective from 6 April 2025 to 5 April 2026, aligning with the UK fiscal year.


  2. Are there any changes to student loan repayment thresholds for 2025/2026?


    Yes, thresholds for Plan 1, Plan 2, and Plan 4 loans have increased, while the threshold for postgraduate loans remains the same.



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