United Kingdom – Tax, Social Security, Minimum wage and Statutory Leave Changes
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The HMRC has issued guidance for 2025 to 2026. The Guidance advises on the rates and thresholds to be applied by employers when operating payrolls or providing expenses and benefits to employees. Below is some of the key notes from the guidance:
PAYE Tax rate and personal allowances
There PAYE tax rate for Scotland has been amended as follows:
| PAYE tax rate | Rate of tax | 2024-2025 Annual earnings the rate applies to the PAYE threshold | 2025-2026 Annual earnings the rate applies to the PAYE threshold |
|---|---|---|---|
| Starter tax rate | 19% | Up to £2,306 | Up to £ 2,827 |
| Basic tax rate | 20% | From £2,307 to £13,991 | From £2,828 to £14,921 |
| Intermediate tax rate | 21% | From £13,992 to £31,092 | From £14,922 to £31,092 |
| Higher tax rate | 42% | From £31,093 to £62,430 | From £31,093 to £62,430 |
| Advanced tax rate | 45% | From £62,431 to £125,140 | From £62,431 to £125,140 |
| Tope tax rate | 48% | Above £125,140 | Above £125,140 |
There is no change to the personal allowance for 2025 to 2026 year for all the territories.
Class 1 National Insurance thresholds
The threshold for Lower, Primary and Secondary thresholds have been amended as per below:
| Class 1 National Insurance thresholds | 2024-2025 | 2025-2026 |
|---|---|---|
| Lower earnings limit | £123 per week £533 per month £6,396 per year | £125 per week £542 per month £6,500 per year |
| Primary threshold | £242 per week £1,048 per month £12,570 per year | £242 per week £1,048 per month £12,570 per year |
| Secondary threshold | £175 per week £758 per month £9,100 per year | £96 per week £417 per month £5,000 per year |
There is no change to the other thresholds.
Employer (secondary) contribution rates
The employer secondary contribution rates have been amended as follows:
| National Insurance category letter | Earnings at or above lower earnings limit up to and including secondary threshold 2024 -2025 | 2025 -2026 | arnings above secondary threshold up to and including Freeport and Investment Zone upper secondary thresholds 2024 -2025 | 2025 -2026 | Earnings above Freeport and Investment Zone upper secondary thresholds up to and including upper earnings limit, upper secondary thresholds for under 21s, apprentices and veterans 2024 -2025 | 2025 -2026 | Balance of earnings above upper earnings limit, upper secondary thresholds for under 21s, apprentices and veterans 2024 -2025 | 2025 -2026 |
||||
|---|---|---|---|---|---|---|---|---|
| A | 0% | 15% | 13.8% | 15% | 13.8% | 15% | 13.8% | 15% |
| B | 0% | 15% | 13.8% | 15% | 13.8% | 15% | 13.8% | 15% |
| C | 0% | 15% | 13.8% | 15% | 13.8% | 15% | 13.8% | 15% |
| D(Investment Zone — deferment) | 0% | 0% | 0% | 0% | 13.8% | 15% | 13.8% | 15% |
| E(Investment Zone — married women and widows reduced rate) | 0% | 0% | 0% | 0% | 13.8% | 15% | 13.8% | 15% |
| F (Freeport) | 0% | 0% | 0% | 0% | 13.8% | 15% | 13.8% | 15% |
| H(apprentice under 25) | 0% | 0% | 0% | 0% | 0% | 0% | 13.8% | 15% |
| I(Freeport — married women and widows reduced rate) | 0% | 0% | 0% | 0% | 13.8% | 15% | 13.8% | 15% |
| J | 0% | 15% | 13.8% | 15% | 13.8% | 15% | 13.8% | 15% |
| K(Investment Zone — state pensioner) | 0% | 0% | 0% | 0% | 13.8% | 15% | 13.8% | 15% |
| L(Freeport — deferment) | 0% | 0% | 0% | 0% | 13.8% | 15% | 13.8% | 15% |
| M (under 21) | 0% | 0% | 0% | 0% | 0% | 13.8% | 15% | |
| N(Investment Zone) | 0% | 0% | 0% | 0% | 13.8% | 15% | 13.8% | 15% |
| S(Freeport — state pensioner) | 0% | 0% | 0% | 0% | 13.8% | 0% | 13.8% | 15% |
| V(veteran) | 0% | 0% | 0% | 0% | 0% | 0% | 13.8% | 15% |
| Z(under 21 — deferment) | 0% | 0% | 0% | 0% | 0% | 0% | 13.8% | 15% |
Class 1A National Insurance: expenses and benefits
National Insurance Class 1A rate on expense and benefits is increased from 13.8% to 15%.
Class 1A National Insurance: termination awards and sporting testimonial payments
National Insurance Class 1A rate on termination awards and sporting testimonial payments is increased from 13.8% to 15%.
Class 1B National Insurance: PAYE Settlement Agreements(PSAs)
Class 1B National Insurance rate is increased from 13.8% to 15%.
National Hourly Minimum Wage
National Hourly Minimum Wage is increased from 6 April 2025.
| Category of worker | Hourly Rate 2024-2025 | Hourly Rate 2025-2026 |
|---|---|---|
| Aged 21 and above(national living wage rate) | £11.4 | £12.21 |
| Aged 18 to 20 inclusive | £8.60 | £10 |
| Aged under 18(but above compulsory school leaving age) | £6.40 | £7.55 |
| Apprentices aged under 19 | £6.40 | £7.55 |
| Apprentices aged 19 and over, but in the first year of their apprenticeship | £6.40 | £7.55 |
These changes are in addition to the changes covered in this alert.
Please contact your Mercans’ services delivery team for any additional information regarding the implications of the above change.
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United Kingdom - Tax, Social Security, Minimum wage and Statutory Leave Changes - 6 April 20252.55 MB