An Accountant’s Guide to UK Payroll in 2025: Legislation, PAYE, and NIC Reforms

The UK business sector has changed rapidly over the past few years. With the Autumn Budget introducing several reforms and technology dominating the scene, the industry is poised for substantial shifts in years to come. In 2025, businesses are in for numerous changes in terms of finance, employment laws, legislation, and payroll.

Every business in the UK, no matter how big or small, is expected to remain compliant with all relevant regulations when it comes to payroll. But, with the constant changes to regulations, this may be challenging, giving a boost to the payroll outsourcing business.

Like each year, payroll legislation UK underwent several reforms in 2024. As an accountant managing payroll for a multitude of businesses, it is important to be aware of these changes and implement them effectively. This will help you help and advise clients better during the upcoming payroll season in 2025.

In this guide, we will address payroll in the digital business world and look at the most important changes to PAYE taxes, National Insurance contributions (NIC), and other key legislative reforms.

Payroll in a Tech-driven World

The advent of groundbreaking technologies, such as cloud computing, automation, AI, and machine learning, caused a significant revolution in the business world. With scores of organisations joining the digital and technological brigade, payroll has changed dramatically. Unlike traditional times, many aspects of payroll are now completely digital, making it crucial for accounting firms to keep themselves updated and technologically efficient.

Following the developments introduced by the Autumn Budget, HMRC confirmed that it will mandate the reporting of Income Tax and Class 1A NICs for most benefits in kind (BiKs) in real time. However, forms P11D and P11D(b) will remain available to those who don’t wish to use the voluntary payrolling option to report these BiKs.

In response to the rapid technological advancements and their pivotal role in payroll management, many accounting firms seek external help in the form of payroll outsourcing services.

Payroll and HR management are highly time-consuming, mundane, and error-prone tasks, making them ideal candidates for digitisation. Additionally, cloud and AI-based payroll are emerging as game-changers for the accounting industry. Thus, technology is the future of payroll and accounting, and their role is only expected to grow in the coming years.

PAYE Online

There are numerous PAYE forms, notices, and returns that can be sent and received online. As a part of operating PAYE, all employers (and accountants managing payroll for clients) must report their payroll information online to HMRC using a Full Payment Submission (FPS) for each pay period.

Forms and notices you can get online:

• P6: Employer coding notification
• P6(B): Employer coding notification (budget)
• P9: Annual coding notification
• SL1 & SL2: Student Loan Start and Stop Notice
• PGL1 & PGL2: Postgraduate Loan Start and Stop Notice
• P11D(b) notification
• Generic notification service

Forms and returns that can be sent online:

• FPS & EPS
• National Insurance number verification request
• P35: Employer annual return
• P38A: Employer supplementary return
• P14: End-of-year (EOY) summary
• P11D and P11D(b)
• P46 (Car): Notification of car made available for private use

If you rely on outsourced payroll services, your extended team will handle all the forms, submissions, and returns.

Changes to Payroll in 2024/25

During the 2024 Autumn Budget, the UK government introduced several payroll and tax regulation changes. While some areas see little or no change, some are more significant and must be noted.

In this section, we will look at some prominent areas with significant reforms critical to payroll.

Income Tax

The UK government introduced minor revisions to income tax allowances for England, Wales, Northern Ireland, and Scotland, except personal allowances.

Allowance Type	2024/25
Personal Allowance	£12,570
Married Couple Allowance	Maximum: £11,080 Minimum: £4,280
Transferrable Marriage Allowance	£1,260
Income limit for Married Couple Allowance	£37,000
Income limit (irrespective of date of birth)	£100,000
Blind Persons’ Allowance	£3,070

Income tax rates for England, Wales, and Northern Ireland

Category	Income	Percentage
Personal Allowance	Up to £12, 570	0%
Basic Rate	£12,571 to £50,270	20%
Higher Rate	£50,271 to £125,140	40%
Additional Rate	Above £125,140	45%

Income tax rates for Scotland

Category	Income	Percentage
Personal Allowance	Up to £12,570	0%
Starter Rate	£12,571 to £14,876	19%
Basic Rate	£14,877 to £26,561	20%
Intermediate Rate	£26,562 to £43,662	21%
Higher Rate	£43,663 to £75,000	42%
Advanced Rate	£75,001 to £125,140	45%
Top Rate	Above £125,140	48%

National Insurance

In the Autumn Budget of 2024, Chancellor Rachel Reeves announced significant changes to National Insurance Contributions (NICs) effective from April 2025. The employer NICs rate will increase from 13.8% to 15%, and the Secondary Threshold—the earnings level at which employers begin paying NICs—will decrease from £9,100 to £5,000 per year. These adjustments are expected to impact sectors with lower-wage employees, such as hospitality and retail, potentially leading to increased operational costs and influencing employment decisions.

Accountants managing payroll operations for clients will need to be updated about these NIC payroll changes or rely on an outsourced payroll services provider.

National Minimum Wage

The National Living Wage (NLW) is raised to £11.44 from April 1, 2025. This represents an increase of 9.8% from the previous rate.

Category	Previous Rate (2023/24)	Current Rate (2024/25)
National Living Wage	£10.42	£11.44
21-22-year-old rate	£10.18	£11.44
18-20-year-old rate	£7.49	£8.60
16-17-year-old rate	£5.28	£6.40
Apprentice Rate	£5.28	£6.40
Accommodation Offset	£9.10	£10.66

Student Loan

The thresholds and rates for student and postgraduate loans are as follows:

	Previous Threshold (Apr ‘24 to Mar ‘25)	New Threshold from April 1, 2025
Plan 1	£22,015	£24,990
Plan 2	£27,295	£28,470
Plan 4	£27,660	£29,000
Postgraduate Loan	£21,000	£21,000

Statutory Payments

Category	Rates (Weekly)
Statutory Sick Pay	£118.75
Statutory Maternity Pay	First six weeks: 90% of average weekly earnings; remaining weeks: £187.70 or 90% of average weekly earnings, whichever is lower
Statutory Paternity Pay	£187.70 or 90% of average weekly earnings, whichever is lower

Other Topics

As of the 2025/26 tax year, the UK government has implemented the following changes:

• Employment Allowance: The Employment Allowance, which allows eligible employers to reduce their annual National Insurance contributions, will increase from £5,000 to £10,500 starting from April 6, 2025.
• Apprenticeship Levy: The Apprenticeship Levy remains at 0.5% of an employer’s annual pay bill. There are no changes to this rate for the 2025/26 tax year.
• Workplace Pension Annual Thresholds: The annual thresholds for workplace pensions, including the earnings trigger and qualifying earnings band, remain unchanged for the 2025/26 tax year. Employers are required to automatically enroll eligible employees who earn above the earnings trigger into a workplace pension scheme.

These adjustments reflect the government’s ongoing efforts to support businesses and employees, ensuring that statutory payments and allowances align with economic conditions and cost-of-living considerations.

Is Payroll Outsourcing a Good Idea for Accountants?

Each year, the UK government makes changes to important legislation causing an impact on payroll. These changes may be challenging to track and implement in each month’s payroll cycle. Moreover, accountants dealing with clients with a global presence are expected to be aware of the legislation of all the concerned countries, making payroll a further daunting task.

To counter these challenges, the payroll outsourcing business flourished rapidly in the UK over the past few years. In 2025, as the accounting industry rapidly progresses toward technological developments and automation, the role of outsourcing will be critical to note.

Our experts at QXAS, who have been at the forefront of the accounting revolution, advocate a collaborative tech and outsourcing approach to achieve the best results. Accountants must choose an outsourcing provider wisely that not only understands their staffing requirements but also their technological needs and provides solutions that align with their growth.

We, at QXAS, recognise the intricacies of payroll and provide tailor-made solutions to suit accounting firms’ needs. Our dedicated payroll specialists work on your preferred software and are well-versed in the latest legislation and compliance.

So, if you are looking for professional payroll support or want to scale your team, now is the time. Call us at +44 208 146 0808 or email us at [email protected] to speak to an outsourcing advisor and hire experienced payroll experts for your team.