Payroll tips for new tax year

Payroll & HR Update: Key Changes to Know for the 2025-26 Tax Year

As we approach April, it’s that time of year again when payroll and HR teams need to get ahead of a series of important changes. At Naail & Co, we’re committed to keeping you informed, prepared, and compliant. Here’s a comprehensive overview of what you need to know as the new tax year begins.

Start the New Tax Year Right – With a Checklist

At Naail & Co, we love a good checklist—it’s a simple but powerful way to ensure nothing gets missed during the year-end transition. Whether you’re using cloud-based or desktop payroll software, it’s essential to verify that your systems are updated and ready for the year ahead.

If you’re using HMRC’s Basic PAYE Tools, double-check that you’re on the most recent version (you’ll find the release number in the bottom-left corner).

Pro tip: Even if your software updates automatically, the responsibility for correct implementation lies with you. Always test and review updates thoroughly before processing live payroll.

Employers’ National Insurance: Major Updates

The 2025–26 tax year brings key changes to secondary National Insurance contributions (NICs):

New Rate: Employers will now contribute 15% in secondary NICs.
New Threshold: The threshold drops significantly to £5,000, down from £9,100.

One silver lining? More employers than ever can claim the Employment Allowance, as the £100,000 threshold has been removed. The allowance itself has also increased from £5,000 to £10,500.

If your business is part of a group of companies, make sure to review the linked companies rules—only one allowance can be claimed across connected entities.

New Statutory Entitlement: Neonatal Leave & Pay

From 6 April 2025, employees whose babies require neonatal care will have access to a new statutory entitlement—neonatal leave and pay.

Unlike other parental leave schemes, this policy is designed to support families during an already challenging time. Ensure your payroll and HR teams are trained and ready to process this type of leave correctly.

National Minimum Wage (NMW) & Salary Sacrifice Considerations

The NMW is increasing again from 1 April 2025, and while that’s great news for employees, it requires careful planning to stay compliant.

Category	New Rate	Increase	% Rise
National Living Wage (21+)	£12.21	£0.77	6.7%
18–20 year old rate	£10.00	£1.40	16.3%
16–17 year old rate	£7.55	£1.15	18.0%
Apprentice rate	£7.55	£1.15	18.0%
Accommodation offset	£10.66	£0.67	6.7%

Now is the perfect time to review salary sacrifice arrangements to ensure employees’ post-sacrifice pay still meets the NMW thresholds. Compliance here is vital—especially as these updates take effect for pay reference periods starting on or after 1 April 2025.

Example: If your payroll week runs from Saturday to Friday, the new NMW rates would only apply to pay periods beginning on or after 6 April. Employers can choose to adopt the new rates from 1 April, but they are only legally required from the start of the relevant pay reference period.

Employment Rights Bill – Not Quite Yet

There’s plenty of chatter about the Employment Rights Bill and the sweeping reforms it may bring. However, don’t expect changes to land in the 2025-26 tax year just yet.

The bill is still making its way through Parliament, and once finalized, it will still require consultation and secondary legislation before anything takes effect. For now: stay informed, but don’t stress.

Naail & Co Is Here to Help

Whether it’s staying ahead of compliance updates, navigating payroll complexities, or training your internal teams—Naail & Co is your trusted partner in payroll, HR, and financial advisory. We ensure you’re always prepared for what’s next, so you can focus on what matters most: growing your business with confidence.

Our service to you

If you are a self employed, business owner/director of company looking to get your accountancy and taxation matters sorted, look no further. We, at Naail & Co, are pro-active and easily accessible accountants and tax advisors, who will not only ensure that all your filing obligations are up to date with Companies House and HMRC, but also you do not pay a penny more in taxes than you have to. We work on a fixed fee basis and provide same day response to all your phone and email enquiries. We will also allocate a designated accounts manager who would have better understanding of your and business financial and taxation affairs. Book a free consultation call using the link below.