Everything you need to know
about the changes coming into effect in the 2025/26 tax year
The start of a new tax year often means new tax changes and regulations coming into effect.
Within this guide, we will present the most important changes and what to look out for in the 2025/26 tax year.
TAX CODE
HMRC have announced that there will be NO uplifts of tax codes for tax year 2025-26.
The ‘standard’ tax code for 2025-26 remains at 1257L (S1257L in Scotland, C1257L in Wales).
INCOME TAX RATES AND THRESHOLDS
The standard employee personal allowance for the 2025 to 2026 tax year is £12.570 annually (£242/week, £1.048/month)
England, Wales and Northern Ireland
Tax rates for England, Wales and Northern Ireland remain frozen at 2024-25 levels.
The rates above Personal Allowance for 2025-26 are as follows:
|
Basic tax rate |
20% |
Up to £37.700 |
|---|---|---|
|
Higher tax rate |
40% |
From £37.701 to £125.140 |
|
Additional tax rate |
45% |
Above £125.140 |
Scotland
The bands to which the various Scottish Tax rates apply have been changed slightly from 2024-25.
The rates above Personal Allowance for 2025-26 are as follows:
|
Starter tax rate |
19% |
£12.571*- £15.397 |
|
Basic tax rate |
20% |
£15.398 – £27.491 |
|
Intermediate tax rate |
21% |
£27.492 – £43.662 |
|
Higher tax rate |
42% |
£43.663 – £75.000 |
|
Advanced tax rate |
45% |
£75.001 – £125.140** |
|
Top tax rate |
48% |
Above £125.140 |
*Assumes individuals are in receipt of the standard Personal Allowance.
**Those earning more than £100,000 will see their Personal Allowance reduced by £1 for every £2 earned over £100,000.
NATIONAL MINIMUM WAGE
The National Living Wage (NLW) and National Minimum Wage (NMW) will increase from 1 April 2025. Employers must ensure that all employees on the NLW or NMW receive the new hourly rate from this date.
National Minimum Wage (NMW) Rates:
- Aged 21 and above (national living wage rate) from £11,44 to £12,21
- Aged 18 to 20 inclusive from £8,60 to £10,00
- Aged under 18 (but above compulsory school leaving age) from £6,40 to £7,55
- Apprentices aged under 19 or in their first year from £6,40 to £7,55
NATIONAL INSURANCE CONTRIBUTIONS
The rates and thresholds for the calculation of employee (primary) NIC remain unchanged from 2024-25, although the ‘Lower Earnings Limit’ (LEL) has increased slightly to £125,00/week.
There has been a major change to employers’ (secondary) NIC, with the Secondary Threshold (ST) being reduced from £9.100,00 to £5.000,00, increasing payroll costs for many employers.
The rate of employers’ NIC has also been raised, so from April 2025 all UK employers will have to pay 15% national insurance on all employees’ earnings above the secondary threshold. (in 2024-25 this was 13,8%)
The table below shows the National Insurance bands for 2025-26.
|
Lower Earnings Limit (LEL) |
Primary Threshold (PT) |
Secondary Threshold (ST) for Employer NIC |
Upper Earnings Limited (UEL) |
|
|
Weekly |
£125 |
£242 |
£96 |
£967 |
|
2-Weekly |
£250 |
£484 |
£193 |
£1.934 |
|
4-Weekly |
£500 |
£967 |
£385 |
£3.867 |
|
Monthly |
£542 |
£1.048 |
£417 |
£4.189 |
|
Directors Annual |
£6.500 |
£12.570 |
£5.000 |
£50.270 |
EMPLOYMENT ALLOWANCE
There will be a significant bump in the employment allowance from £5.000,00 to £10.500,00 in 2025/2026, offering greater savings for eligible employers. This means that all UK employers are eligible to receive the £10.500,00 employment allowance to offset their total Class 1 ER NICs due. (Please note Only one company within a group (or with connected companies) can claim the allowance.)
The current restriction preventing employers with secondary Class 1 NICs over £100.000,00 from claiming will be removed from 6 April 2025, expanding eligibility.
Eligibility to claim Employment Allowance:
If your company cirtumstances change and more than one employee or director earns above the Secondary Threshold, you will be eligible for Employment Allowance for the whole tax year. This includes companies where: all employees are directors where both earn above the Secondary Threshold. The Secondary Threshold is set at £96 per week for 2025/26.
When businesses are no longer eligible to claim the Employment Allowance:
- If your business or charity stops employing staff during the year, you will no longer have a liability to pay employer Class 1 NICs and you do not need to do anything further. Your existing claim for the Employment Allowance will remain in place but cannot be used again until you start incurring employer Class 1 NICs liabilities again.
- From April 2016, if your business is a limited company, where the only employee paid above the secondary threshold is the Director, you will no longer be able to claim the Employment Allowance.
- In the rare circumstance that the nature of your business changes and your business is no longer eligible for the Employment Allowance, you can stop your claim by following the instructions contained in your own payroll software or HMRC Basic PAYE Tools.
- Stopping your claim means that no allowance is due that year, and you must repay any Class 1 NICsthat have previously been covered by the Employment Allowance.”
STATUTORY PAYMENTS
From April 2025, there will be new rates for statutory maternity, paternity and other parental and sick pay, as well as other benefits for employees who qualify. There is also a new weekly rate for Statutory Sick Pay (SSP) of £118,75.
|
Statutory payment |
Rate in 2024-25 |
Rate in 2025-26 |
|
Statutory Paternity Pay (SPP) |
||
|
Statutory Maternity Pay (SMP) |
||
|
Shared Parental Pay (ShPP) |
||
|
Statutory Bereavement Leave (SBP) |
£184,03 |
£187,18 |
|
Statutory Adoption Pay (SAP) |
||
|
Statutory Neonatal Care Pay (SNCP) |
||
|
Statutory Sick Pay (SSP) |
£116,75 |
£118,75 |
Statutory Neonatal Care Pay (SNCP)
SNCP is a new statutory allowance to be introduced in April 2025. It is for parents who have a child that requires neonatal care in the first 28 days following birth and spend at least 7 continuous days in care. Payment is made for a maximum of 12 weeks. The entitlement applies to parents of children born on or after 6 April 2025 and who are employed in England, Scotland or Wales. Neonatal Care Leave and Statutory Neonatal Care Pay is not currently available for those employed in Northern Ireland.
The Lower Earnings Limit (LEL) for 2025-26 has risen to £125 (the LEL was £123 in 2024-25). The ‘LEL’ is the minimum amount an employee must earn in order to qualify for SSP, SMP etc.
If your gross National Insurance bill (both employee and employer) for the previous tax year was less than
£45.000,00 before deducting Employment Allowance, you may qualify for Small Employers’ Relief (SER).
This allows you to reclaim more than 100% of any statutory parental pay you provide:
- Up to 5 April 2025: Claim 103% (100% plus an additional 3%).
- From 6 April 2025: Claim 108,5% (100% plus an additional 8,5%).
The notice period for requesting statutory parental leave is 28 days before the intended start date, offering more flexibility and accommodating last-minute changes.
The first six weeks of Statutory Maternity Pay (SMP) and Statutory Adoption Pay (SAP) will remain the same at 90% of average weekly earnings (AWE). After this, employees can expect a statutory weekly rate of 90% of AWE or £187,18, whichever is lower.
PENSION
The rules remain the same, the employer must automatically enrol an employee into a pension scheme and make contributions to their pension if all of the following apply:
- they’re classed as a ‘worker’
- they’re aged between 18 and State Pension age
- they’re earn at least £10.000 per year.
The minimum contribution percentages relating to Automatic Enrolment pension schemes have not changed for 2025-26, and remain at 5% for the employee and 3% for the employer.
The full new state pension will increase. It means the full new state pension weekly amount from 2025/26 will be £230,25 – up from £221,20. You can claim the new State Pension if you’re: a man born on or after 6 April 1951, or a woman born on or after 6 April 1953.
The full basic state pension will increase by £13,30 per week. From 2024/25, the full basic state pension weekly amount will be £176,45 – up from £169,50. You’ll get the basic State Pension if you’re: a man born before 6 April 1951, or a woman born before 6 April 1953.
VALUE ADDED TAX (VAT)
Registration thresholds
|
Circumstance |
Threshold |
What to do |
|
Total taxable turnover |
More than £90.000 |
|
|
Bringing goods into Northern Ireland from the EU (‘acquisitions’) |
More than £90.000 |
|
|
Selling goods from Northern Ireland to consumers in the EU (‘distance selling’) |
Total sales across the EU over £8.818 |
|
|
VAT-registered – taxable turnover |
Less than £88.000 |
VAT accounting scheme thresholds
|
Scheme |
Threshold to join scheme |
Threshold to leave scheme |
|
£150.000 or less |
More than £230.000 |
DIVIDEND ALLOWANCE
From 6th April 2025, the tax-free allowance for those who receive dividend incomes will be the same.
The first £500 of dividend income for an individual is tax free. Any dividends over this are subject to dividend tax and a self-assessment may need to be filed.
Dividends are not subject to National Insurance.
|
Band |
Threshold |
Rate |
|
Personal allowance: How much income you can earn before you start to pay income tax. No tax on this income. |
£0 – £12.570 |
0% |
|
Basic rate income tax: 8.75% tax on the proportion of income which falls into this tax bracket. |
£12.571 – £50.270 |
8,75% |
|
Higher rate income tax: The part of your income which falls into this tax band is taxed at 33.75% |
£50.271 – £125.140 |
33,75% |
|
Additional rate income tax: This is the highest rate. The income you earn above this threshold is subject to tax at 45% |
£125.140 upwards |
39,35% |
STUDENT AND POSTGRADUATE LOAN
These rates apply from your first pay date on or after the 6th of April.
|
Plan type |
2025/26 threshold / year |
2025/26 threshold / month |
Deduction rate |
|
Plan 1 |
£26.065,00 |
£2.172,00 |
9% |
|
Plan 2 |
£28.470,00 |
£2.372,50 |
9% |
|
Plan 4 |
£32.745,00 |
£2.728,75 |
9% |
|
Postgraduate |
£21.000,00 |
£1.750,00 |
6% |
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