As we approach April 2025, several key changes to payroll regulations in the UK are set to take effect. These updates will impact National Insurance Contributions (NICs), Employment Allowance eligibility, the current statutory payments, salary sacrifice schemes, and minimum wage rates. At Advo, we also wish to support employers and ensure that they are not at risk from any HMRC inspections or fines or claims made of underpayment of wages.

Below is an overview of these changes and how they may affect both you as employers and your employees.​

1. Changes to National Insurance Rates

For Employers:

• Rate Increase: From 6 April 2025, the employer’s NIC rate will increase from 13.8% to 15% on earnings above the threshold. ​
• Secondary Threshold Reduction: The threshold at which employers start paying NICs will be decreasing from £9,100 to £5,000 per annum. These changes mean that employers will incur higher NIC costs, as they will start paying NICs at a higher rate and on a larger portion of their employees’ earnings.​

For Employees:

• No Changes Announced: As of now, there have been no announced changes to employees’ NIC rates or thresholds for April 2025.

2. Updated Employment Allowance Eligibility Criteria

The Employment Allowance, which allows eligible businesses to reduce annual National Insurance liability, will undergo significant changes:​

• Increased Allowance: The allowance will increase from £5,000 to £10,500.
• Eligibility Expansion: The previous £100,000 threshold for eligibility will be removed, making all employers eligible to claim the allowance regardless of their NIC liability in the prior tax year. ​

3. Changes to Statutory Sick Pay (SSP) and Statutory Rates

Statutory sick pay can be paid for up to 28 weeks and will increase to £118.75 from 6 April 2025 and to receive this an employee must have been off sick or at least 4 days in a row, including non-working days, and earn on average at least £125 a week, before tax.

Statutory Maternity, Paternity, Adoption, Shared Parental, Parental Bereavement and Neonatal Care Pay will increase to £187.18 per week or 90% of the employee’s average weekly earnings, whichever is lower

4. Salary Sacrifice Schemes: Potential Rise in Popularity

With the increase in employer NICs, salary sacrifice schemes are gaining attention as a strategy to manage costs:​

• How They Work: Employees agree to exchange a portion of their gross salary for non-cash benefits, such as additional pension contributions, childcare vouchers, or cycle-to-work schemes.​
• Benefits: This arrangement can lead to reduced National Insurance liabilities for both employers and employees, as the taxable salary is lowered.​

Employers may consider promoting these schemes to offset the impact of higher NIC rates.​

5. National Living Wage (NLW) and National Minimum Wage (NMW) Increases

To support lower-paid workers, the government has announced increases to the NLW and NMW rates from 1 April 2025:​

• National Living Wage (for workers aged 21 and over): Increased from £11.44 to £12.21 per hour, a 6.7% rise.
• 18 to 20-Year-Old Rate: Increased from £8.60 to £10.00 per hour, marking a 16.3% rise. ​
• 16 to 17-Year-Old and Apprentice Rate: Both increased from £6.40 to £7.55 per hour, an 18% increase.

Action Steps for Employers

• Review Payroll Systems: Ensure all changes to NIC rates and statutory payments are accurately implemented.​
• Claim Employment Allowance: If eligible, apply for the increased Employment Allowance to reduce your NIC liability.​
• Consider Salary Sacrifice Schemes: Evaluate the benefits of offering or expanding these schemes to manage increased NIC costs.​
• Update Wage Structures: Adjust pay rates to comply with the new NLW and NMW rates.​

The Payroll team at Advo are here to support and advise, please do contact us if you need further information on the changes.