Roundup of Payroll Changes for 2024/25: What You Need to Know
The 2024/25 tax year is in progress, and staying informed on payroll changes is essential. From tax thresholds to National Insurance updates and statutory payments, here’s a roundup of the key legislative changes to keep your payroll compliant and running smoothly.
Tax Thresholds for 2024/25
The UK tax thresholds, excluding Scotland, remain largely unchanged for the new tax year. The standard tax code (1257L) is still in place, with the following tax bands:
● 20% on earnings up to £37,700
● 40% on earnings between £37,701 and £125,140
● 45% on earnings above £125,140
The Personal Allowance remains frozen at £12,570 until 2027/28, with an income limit of £100,000. The Married Couple’s Allowance income limit increases to £37,000, up from £34,600.
Readers in Scotland should be aware of the introduction of new rates for the 2024/25 tax year, including an “Advanced” rate of 45% for certain earnings.
National Insurance Thresholds
From April 2024, National Insurance thresholds remain largely unchanged. The Upper Secondary Threshold remains £50,270 for employees under 21 and apprentices under 25, with specific thresholds for veterans and Freeport workers.
The employee NIC rate has dropped to 8% for earnings between £12,570 and £50,270, while the employer rate stays at 13.8%. Key thresholds include:
● 0% on earnings up to £123 per week (employee and employer)
● 8% on earnings between £123 and £967 per week (employee) / 13.8% (employer)
● 2% on earnings over £967 per week (employee) / 13.8% (employer)
To help manage these changes, consider using AI-powered payroll tools for smoother payroll processing.
Statutory Payments and Other Changes
The rates for Statutory Sick Pay (SSP) and other statutory payments, including maternity, paternity, adoption, and shared parental pay, increased to £184.03 per week from 7th April 2024. The daily rates for SSP vary depending on the number of qualifying days worked, with the maximum rate being £116.75 for a full week.
National Living and Minimum Wage Rates
From 1st April 2024, the National Living Wage increased by 9.8% to £11.44 per hour for workers aged 21 and over. The National Minimum Wage rose to £8.60 for ages 18-20 and £6.40 for under 18s and apprentices, ensuring younger workers benefit from inflation adjustments.
Holiday Pay and Employment Changes
1) Holiday Pay Calculation
A key update for the 2024/25 tax year is the change in the reference period for calculating holiday pay for workers with irregular hours. From 6th April 2024, this period increased from 12 weeks to 52 weeks. For workers with regular hours, the calculation method remains the same.
2) Employment (Allocation of Tips) Act
New legislation also came into force on 1st July 2024 mandating that all tips and service charges must be fairly allocated among workers. Employers must distribute 100% of tips to staff, ensuring transparency in the process.
3) Right-to-Work Fines
From January 2024, fines for failing to conduct proper right-to-work (RTW) checks have tripled. First breaches now incur fines of up to £45,000 per worker, and repeat offences can result in fines of £60,000 per worker. Employers should ensure they conduct checks using Identity Document Validation Technology (IDVT), online services, or manual methods.
Company Car Rates
No major changes will be implemented to company car tax rates for 2024/25. However, beginning in 2025, electric vehicle tax rates will gradually increase by one percentage point per year, reaching a maximum of 5% by 2028.
Stay Updated on Payroll Changes
These updates highlight some of the key changes payroll professionals need to prepare for in the 2024/25 tax year. To ensure you stay compliant, familiarise yourself with these latest payroll updates and stay informed for future updates.
