As the new tax year nears closer, we have been busy keeping up to date with all the changes that will affect your payroll. We thought you might find a summary of any changes that may affect the processing of payroll or your monthly wage and/or HMRC costs useful, so we’ve put together a short summary below for your reference.
To discuss any of these points in more detail, feel free to contact us via email or Codebase.
Employment Rights Act
- Statutory Sick Pay (SSP) waiting days will be abolished, so SSP is payable from day one of a period of sickness absence.
- The lower earnings limit used for determining eligibility for SSP will also be removed.
- Day-one unpaid parental and paternity leave becomes a right for all employees, but this does not affect entitlement to any statutory payments.
Pay As You Earn (PAYE) Rates and Thresholds
- Income Tax bands are frozen for another year.
- NICs lower earnings limit increases from £542/month to £559/month. This determines entitlement to state benefits but does not affect NI contributions. Other NIC bands remain frozen in line with Income Tax.
- A new Student Loan Plan Type 5 is introduced for undergraduates starting courses on or after 1 August 2023.
- Student Loan repayment thresholds increase for Plans 1-4 by 3.2% for 2026-27, then are frozen from 26-27 through to 29-30.
Reporting of Benefits In Kind (BIKs)
- All company car BIK value rates increase by 1%, with the maximum benefit value remaining 37% of list price.
- Payrolling Benefits In Kind (PBIK) becomes mandatory for 27-28, delayed by one year from HMRC’s original 26-27 plan.
- Voluntary registration is still possible and encouraged to ease transition from P11D reporting to PBIK, and must be completed by 5 April 2026.
- Under PBIK, employers deduct Income Tax on taxable benefits through payroll each pay period instead of filing P11Ds after tax year end.
- As a promotional offer, we are continuing to offer PBIK at a lower price (max. £12/year/employee vs. £15/year/employee for P11D). Please contact us if you are interested in moving to PBIK and we will explain the setup steps.
National Minimum Wage
- Rate for employees aged 21 and above increases from £12.21 to £12.71.
- Rate for employees aged 18-20 increases from £10.00 to £10.85.
- Rate for under-18s and apprentices increases from £7.55 to £8.00.
- Real Living Wage increases from £12.60 to £13.45 (UK) and from £13.85 to £14.80 (London).
Statutory Payments
- Upper limit for 33 weeks of Statutory Maternity Pay (SMP) and Statutory Adoption Pay (SAP) increases by 3.8%, from £187.18 to £194.32 per week. The first 6 weeks remain fixed at 90% of Average Weekly Earnings.
- Caps also increase to £194.32 per week for 2 weeks of Statutory Paternity Pay (SPP), 37 weeks of Statutory Shared Parental Pay (ShPP), Parental Bereavement Pay (SPBP), and 12 weeks of Neonatal Care Pay.
- SSP qualifying condition changes are as detailed in the Employment Rights Act section above.
- Small Employers’ Relief (SER) is increasing the compensation rate for statutory payments to 9%. This means eligible employers (total Class 1 NICs bill below £45,000 in 25-26) can claim back 109% of SMP, SPP, SAP, ShPP, SPBP, and Neonatal Care Pay.
- Employers not eligible for SER will still be able to claim back 92% of these payments.
Please note: This is only a summary of changes that may have potential effects on the processing and cost of your payroll, and as a result is not an exhaustive list.
