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Payroll tax changes for the 2025/26 UK tax year

by Intuit•4• Updated 2 months ago

Learn more about the latest payroll tax changes for the 2025/26 UK tax year.

This article is for customers who use QuickBooks Online Core Payroll, Advanced Payroll or Bureau Payroll.

Investment Zone Employer NICs Relief

From 6 April 2025, QuickBooks Payroll will continue to support Investment Zone NIC category letters, with a key change: employers must now record the postcode where the employee works if their NIC category falls within an Investment Zone.

If an employee falls under one of the following NIC category letters: F, I, L, S, N, E, D, K, the employer must provide the postcode of the employee’s workplace.

Category letterDetails
NStandard category letter.
EMarried women and widows entitled to pay reduced NICs.
KEmployees over the state pension age.
DEmployees who can defer paying 12% NICs and pay only 2% because they're already paying it in another job.

Income tax rates and thresholds

Income Tax is the tax you pay to the government on your yearly earnings. If you're self-employed, this includes profits from online sales. The amount you owe depends on two main factors: how much you earn and your Personal Allowance, which you can find in your tax code.

Select the relevant heading to see the breakdown of tax bands and rates. The tax year runs from 6 April 2025 to 5 April 2026.

Basic rate20% on income from £1 - £37,700
Higher rate40% on income from £37,701 - £125,140
Additional rate45% on income above £125,141
Starter rate19% on income from £1 - £2,827
Basic rate20% on income from £2,828 - £14,921
Intermediate rate21% on income from £14,922 - £31,092
Higher rate42% on income from £31,093 - £62,430
Advanced rate45% on income from £62,431 - £125,140
Top rate48% on income above £125,141
Basic rate20% on income from £1 - £37,700
Higher rate40% on income from £37,701 - £125,140
Additional rate45% on income above £125,141

You can also find the income Tax rates and allowances for current and past years on the HMRC website.


Automatic enrolment earnings thresholds

From April 2025, the auto-enrolment thresholds remain unchanged:

  • The auto-enrolment earnings trigger stays at £10,000
  • The lower earnings limit of the qualifying earnings band stays at £6,240
  • The upper earnings limit of the qualifying earnings band stays at £50,270

For automatic enrolment contributions:

  • The minimum contribution for employers is 3%.
  • The total minimum contribution (employer and employee) is 8%.

These changes affect employees enrolled in a workplace pension scheme.


Statutory weekly payments

The following statutory payments will be £187.18 or 90% of the employee's average weekly earnings, whichever is lower:

  • Statutory Maternity Pay (SMP)
  • Statutory Paternity Pay (SPP)
  • Statutory Adoption Pay (SAP)
  • Statutory Shared Parental Pay (ShPP)  
  • Statutory Parental Bereavement Pay (SPBP)  

Note: The weekly thresholds for the above has changed to £125.00 (NI Lower Earnings Limit).

  • The weekly rate for Statutory Sick Pay (SSP) £118.75.

Statutory neonatal care leave and pay

From April 2025, Statutory Neonatal Care Leave & Pay (SNCLP) is introduced to support employed parents of babies requiring neonatal care.

  • Both mothers and fathers are entitled to Statutory Neonatal Care Leave & Pay.
  • The length of leave depends on individual circumstances and is based on a tiered system.
  • Changes apply to FPS, EPS, P60, and other payroll reports (P32).
  • Employers must track eligibility and calculations within payroll settings.

For more information, refer to the HMRC guidance on Neonatal care leave and pay.


Statutory paternity pay (SPP) process

  1. Parents-to-be entitled to SPP must give 28 days' notice before their chosen paternity leave dates.
  2. Paid Paternal Leave can now be taken in two separate one-week periods or as a continuous two-week block within 52 weeks of their child’s birth.

The way you process SPP depends on your payroll subscription:


Student and postgraduate loans

  • Plan 1 threshold: increases from £24,990 to £26,065
  • Plan 2 threshold: increases from £27,295 to £28,470
  • Plan 4 threshold (Scotland only): increases from £31,395 to £32,745
  • Student loan repayment rate: remains 9%
  • Postgraduate loan threshold: remains at £21,000
  • Postgraduate loan deduction rate: remains 6%

Employment allowance

Employers may be eligible for the Employment Allowance, reducing National Insurance liability by up to £10,500. If eligible, update your payroll settings and notify HMRC via an EPS (Employer Payment Summary). Check your eligibility on the HMRC website.

From 6 April 2025, the rate of compensation will increase from 3% to 8.5%. Employers who qualify for Small Employers Relief will therefore be able to reclaim 108.5% from HMRC.

Note: This recovery applies to all statutory payments excluding Statutory Sick Pay (SSP)


Employer Payment Summary (EPS) and Construction Industry Scheme (CIS) Suffered

If you're a subcontractor, you can reclaim CIS tax deductions made by your clients. To do this, submit an EPS each month to HMRC, listing CIS deductions for the year.

  • Always include your Unique Taxpayer Reference (UTR) to avoid EPS submission rejection.
  • Stay compliant by ensuring timely submissions to HMRC.

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