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Payroll tax changes: Key updates and guidance

by Intuit•4• Updated 1 week ago

Learn about the latest payroll tax changes and how QuickBooks Payroll helps you stay compliant across tax years.

Note: For the most up-to-date information on tax codes and payroll changes, refer to HMRC guidance. You can also check your current tax code using HMRC's online tax code checker


Income tax rates and thresholds

Income Tax is the tax you pay on your yearly earnings. The amount you owe depends on how much you earn and your Personal Allowance, which is included in your tax code.

Select the relevant heading to see the tax bands and rates:

Basic rate20% on income from ÂŁ1 - ÂŁ37,700
Higher rate40% on income from ÂŁ37,701 - ÂŁ125,140
Additional rate45% on income above ÂŁ125,141
Starter rate19% on income from ÂŁ1 - ÂŁ3,967
Basic rate20% on income from ÂŁ3,968 - ÂŁ16,956
Intermediate rate21% on income from ÂŁ16,957 - ÂŁ31,092
Higher rate42% on income from ÂŁ31,093 - ÂŁ62,430
Advanced rate45% on income from ÂŁ62,431 - ÂŁ125,140
Top rate48% on income above ÂŁ125,141
Basic rate20% on income from ÂŁ1 - ÂŁ37,700
Higher rate40% on income from ÂŁ37,701 - ÂŁ125,140
Additional rate45% on income above ÂŁ125,141
For more detail, see our guide to Understanding Income Tax. To estimate what you’ll pay, use HMRC’s official calculator. Current and past rates and allowances are listed on the HMRC site.

Automatic enrolment earnings thresholds

The auto-enrolment thresholds stay the same from April 2026:

  • The earnings trigger stays at ÂŁ10,000
  • The lower earnings limit of the qualifying earnings band stays at ÂŁ6,240
  • The upper earnings limit of the qualifying earnings band stays at ÂŁ50,270

For automatic enrolment contributions:

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

These thresholds apply to employees enrolled in a workplace pension scheme.


Statutory weekly payments

The following statutory payments will be ÂŁ194.32 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)
  • Statutory Neonatal Care Pay (SNCP)

Note: The weekly threshold for the above payments has changed to ÂŁ129.00 (NI Lower Earnings Limit).

Statutory Sick Pay (SSP) will be paid at whichever is lower:

  • 80% of the employee's average weekly earnings, or
  • The flat rate of ÂŁ123.25 per week

Student and postgraduate loans

Loan typeThreshold
Plan 1 thresholdIncreases from ÂŁ26,065 to ÂŁ26,900
Plan 2 thresholdIncreases from ÂŁ28,470 to ÂŁ29,385
Plan 4 threshold (Scotland only)Increases from ÂŁ32,745 to ÂŁ33,795
Plan 5 thresholdÂŁ25,000
Student loan repayment rateRemains 9%
Postgraduate loan thresholdRemains at ÂŁ21,000
Postgraduate loan deduction rateRemains 6%

Employment allowance

Employers may be eligible for the Employment Allowance, which reduces your National Insurance liability by up to ÂŁ10,500. If you're eligible, update your payroll settings and notify HMRC via an Employer Payment Summary (EPS). Check your eligibility on the HMRC website.

From 6 April 2026, the rate of compensation increases from 8.5% to 9%. If you qualify for Small Employers Relief, you'll be able to reclaim 109% 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 the CIS deductions for the year.

Key points:

  • Always include your Unique Taxpayer Reference (UTR) to avoid your EPS being rejected.
  • Make sure you submit to HMRC on time to stay compliant.
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