With the new tax year underway, it’s time to review your payroll to ensure that it reflects the latest changes and updates to legislation around pay, holiday and tax.

The new financial year is a busy time for employers and business owners, so we’re here with the most recent updates to payroll to help you stay on top of your business finances in 2024/25!

Let’s turn our attention first to the question on everyone’s lips – what tax changes have been introduced for this financial year?

The tax question – Income Tax and National Insurance

From a payroll perspective, this is likely to be an uneventful year for Income Tax thresholds.

As in the previous year, the Personal Allowance threshold remains at £12,570 and the three rate bands are also unchanged.

However, National Insurance (NI) has claimed the headlines following both the 2023 Autumn Statement and 2024 Spring Budget, with a total reduction in Class 1 employee NICs of four percentage points, to eight per cent from 6 April 2024.

Your payroll needs to reflect this if you employ staff on a Pay-As-You-Earn (PAYE) basis.

It is also important to note that this reduction applies to employee NI Contributions only, with employer NICs remaining at 13.8 per cent where applicable.

Rising wage levels

One of the most significant payroll changes impacting employers is the rise in the National Minimum Wage (NMW) and National Living Wage (NLW) – marking one of the most substantial rises in recent history.

As of 6 April 2024, NMW and NLW rates are set at:

• Over 21 years old – £11.44
• 18-20 years old – £8.60
• Under 18 years old and apprentices – £6.40

Remember that, for the first time, the NLW of £11.44 has been extended to 21- and 22-year-olds, so make sure that your payroll is reflective of this major change.

For some employers, this rise may present challenges to cash flow and reserves.

In addition to ensuring your employees are paid according to their new entitlement, we would also advise taking the opportunity to review other costs and make sure your financial plan works for your business.

Holiday pay entitlement

Applying to holiday years commencing from 1 April 2024, employers of part-year or irregular hours workers must calculate holiday entitlement and pay at a rate of 12.07 per cent of hours worked in a pay period.

This can be paid through one of two methods:

• Accrual – Employees can receive holiday pay at the time they take their leave, which is the more traditional method.
• Rolling up – Employees can receive holiday pay for the year split equally across all pay periods, effectively including holiday pay in regular payroll payments.

If an employee has had statutory, parental or sick leave in the current month, then the average pay should be calculated using gross pay taken over the previous 52 weeks.

Statutory payments

As an employer, you may be expected to offer statutory payments to employees under certain circumstances, such as maternity or adoption leave.

Statutory payments are seeing a small boost for 2024/25, covering all types of parental pay and sick pay.

The Statutory Sick Pay (SSP) rate has increased to £116.75 per week from 6 April 2024.

A new parental pay rate of £184.03 (up from £172.48) has also been introduced and applies to:

• Statutory Maternity Pay (SMP)
• Statutory Adoption Pay (SAP)
• Statutory Paternity Pay (SPP)
• Statutory Shared Parental Pay (ShPP)
• Statutory Parental Bereavement Pay (SPBP)

Make sure that you know when you need to make these payments and the rate that you need to be providing.

Need further advice on payroll and the latest legislation? Contact our expert payroll team today.