With the new tax year on the horizon, employers should be aware of the rates, thresholds, and allowances to use for their 2024/25 payroll. If you pay any of your employees the National Living Wage or Minimum Wage, you will also need to update your payroll accordingly to ensure that you’re paying the increased rates from 1 April 2024.
Below, we provide an overview of Income Tax and National Insurance, Minimum Wage increases, and statutory payments for the new tax year, which runs from 6 April 2024 to 5 April 2025. We also summarise your year-end payroll responsibilities as an employer. This information will be helpful as you make preparations for your 2024/25 payroll.
Income Tax for the 2024/25 tax year
During the Autumn Statement 2023, the UK Government confirmed that Income Tax rates and thresholds for the 2024/25 tax year will remain frozen for taxpayers in England and Northern Ireland.
There was some speculation that the Chancellor would announce cuts to Income Tax in the upcoming Spring Budget on 6 March. However, in light of news that the UK economy recently fell into recession, this is now extremely unlikely.
The tax-free Personal Allowance of £12,570, which applies to taxpayers in all four nations of the UK, will be frozen until April 2028. This means that the standard Personal Allowance in the new tax year will remain at £242 per week or £1,048 per month.
The Welsh government has proposed that Income Tax rates and thresholds for 2024/25 remain equal to those in England and Northern Ireland. However, this is still subject to the Senedd’s approval.
Income tax in England, Wales, and Northern Ireland
| Tax band | Tax rate | Taxable income threshold |
| Personal allowance | 0% | Up to £12,570 |
| Basic rate | 20% | £12,571 to £50,270 |
| Higher rate | 40% | £50,271 to £125,140 |
| Additional rate | 45% | Over £125,140 |
Income tax in Scotland
With the exception of the UK-wide Personal Allowance, the Scottish Government sets its own Income Tax rates and thresholds. If any of your employees are Scottish taxpayers, there are several changes to be aware of for your 2024/25 payroll:
- The Starter rate and Basic rate thresholds will increase by 6.7%. This is in line with inflation, based on the Consumer Price Index from September 2023
- A new ‘Advanced rate’ tax band of 45% will apply to income from £75,000 to £125,140
- 1 percentage point will be added to the Top rate of tax, taking it from 47% to 48%
| Tax band | Tax rate | Taxable income threshold |
| Personal allowance | 0% | Up to £12,570 |
| Starter rate | 19% | £12,571 to £14,876 |
| Basic rate | 20% | £14,877 to £26,561 |
| Intermediate rate | 21% | £26,562 to £43,662 |
| Higher rate | 42% | £43,663 to £75,000 |
| Advanced rate | 45% | £75,001 to £125,140 |
| Top rate | 48% | Above £125,140 |
These rates are still subject to Scottish parliamentary approval. More information on Scottish Income Tax for 2024 to 2025 is available from gov.scot.
National Insurance contributions for your 2024/25 payroll
National Insurance rates and thresholds are set by the UK Government and apply to taxpayers in all four nations.
On 6 January 2024, the main rate of employee (‘primary’) Class 1 National Insurance contributions (NIC) was cut by 2 percentage points, from 12% to 10%. In the Spring Budget, this was further reduced to a rate of 8%, effective from 6 April 2024.
The table below shows the Class 1 National Insurance thresholds and rates that will apply to employees and employers in the UK for the 2024/25 tax year.
Class 1 National Insurance thresholds and rates 2024/25
| National Insurance threshold | Level of earnings | NIC rate |
| Lower Earnings Limit (LEL) | £123 per week
£533 per month £6,396 per year |
0% |
| Primary Threshold (PT) | £242 per week
£1,048 per month £12,570 per year |
8% |
| Secondary Threshold (ST) | £175 per week
£758 per month £9,100 per year |
13.8% |
| Upper Earnings Limit (UEL) | £967 per week
£4,189 per month £50,270 per year |
2% |
The National Insurance thresholds set the points at which different contributions are due on employees’ earnings. Your payroll software works out and deducts these contributions every time you pay your staff.
Lower Earnings Limit (LEL)
On earnings up to the LEL, employees do not make National Insurance contributions, but they get the benefits of paying. If you pay any of your employees less than £123 per week or £533 per year, you do not have to deduct any Class 1 NIC from their wages.
Primary Threshold (PT)
This is the point at which employees start making Class 1 National Insurance contributions on their earnings. If you pay any of your employees more than £242 per week or £1,048 per month, you must deduct 8% Class 1 NIC from their wages each payday.
Secondary Threshold (ST)
Employers start paying ‘secondary’ Class 1 National Insurance on their employees’ wages above this threshold. This means that you will have to pay 13.8% employer’s NIC on any employee earnings from £175 per week or £758 per month.
Upper Earnings Limit (UEL)
Employees pay a lower rate of 2% Class 1 NIC on earnings above this threshold. If you pay any of your employees more than £967 per week or £4,189 per month, you must deduct 2% Class 1 NIC from the portion of their income that exceeds the threshold. The standard rate of 8% will still apply to their earnings below the UEL.
Increase in Student Loan thresholds
From 6 April 2024, the repayment threshold for pre-2012 (Plan 1) student loans will increase to £24,990 (£480.57 per week, £2,082.50 per month). Plan 4 will rise to £31,395 (£603.75 per week, £2,616.25 per month).
The repayment threshold for post-2012 (Plan 2) student loans will be frozen at £27,295 (£2,274.58 per month, £524.90 per week). Similarly, the thresholds for postgraduate loans will remain at £21,000 (£403.84 per week, £1,750 per month).
The deductions rate for all types of student loans will stay at 9% for the new tax year, whilst the rate for postgraduate loans will be frozen at 6%.
If any of your employees are required to make repayments and their earnings are above the relevant threshold, you will need to record the deductions in your payroll software. It will then automatically calculate and deduct their repayments from their wages.
Employment Allowance
The Employment Allowance for 2024/25 will remain the same. This means that eligible employers can reduce their annual Class 1 employer’s National Insurance liability by up to £5,000.
National Minimum Wage and Living Wage increases
The hourly rates of National Minimum Wage and National Living Wage will increase on 1st April 2024. These changes are based on the recommendations of the Low Pay Commission. For the first time, the National Living Wage rate will extend to workers aged 21 and 22.
If you pay any of your employees the National Minimum Wage or Living Wage, you will need to update your 2024/25 payroll to reflect the following new rates, where applicable:
| New rate | Increase per hour | % increase per hour | |
| National Living Wage (aged 21 and over) | £11.44 | £1.02 | 9.8% |
| 18-20 year olds | £8.60 | £1.11 | 14.8% |
| 16-17 year olds | £6.40 | £1.12 | 21.2% |
| Apprentice Rate | £6.40 | £1.12 | 21.2% |
The National Living Wage should not be confused with the voluntary real Living Wage, which is currently £12 (£13.15 in London) for workers aged 18 and over. Overseen by the Living Wage Foundation, these rates are independently calculated each year based on the cost of living.
Changes to statutory payments and leave
All statutory payments will increase by 6.7% from April 2024. The government will also introduce a minor change to how employees can take their Statutory Paternity Leave. The family-friendly payments below will apply from 7 April 2024.
1. Statutory Maternity Pay and Adoption Pay
Eligible employees will receive up to 39 weeks of Statutory Maternity Pay or Statutory Adoption Pay at:
- 90% of their average weekly earnings before tax – for the first 6 weeks of their leave
- £184.03 or 90% of their average weekly earnings (whichever is lower) – for the remaining 33 weeks of their leave
You must continue to deduct Income Tax and National Insurance from these payments. Use HMRC’s SMP calculator to work out an employee’s Statutory Maternity Pay and Leave entitlement.
2. Statutory Paternity Pay
Eligible employees will be entitled to two weeks of Statutory Paternity Pay at:
- £184.03 or 90% of their average weekly earnings (whichever is lower) – for a total of two weeks
To provide greater flexibility for fathers and partners, the government is also making changes to Paternity Leave. From 7 April, eligible employees will have the option to take their statutory paid leave in two non-consecutive blocks of one week rather than only one block of leave.
They will have a 52-week window from the child’s birth or date of adoption placement in which to take this time off.
3. Statutory Shared Parental Pay
Eligible employees will be entitled to two weeks of Statutory Shared Parental Pay at:
- £184.03 or 90% of their average weekly earnings (whichever is lower)
GOV.UK provides detailed guidance for employers on Shared Parental Leave and Pay.
4. Statutory Sick Pay
Statutory Sick Pay (SSP) will increase from £109.40 to £116.75 per week for eligible employees, with effect from 6 April 2024.
The same weekly SSP rate will apply to all employees. However, the amount you pay for each day that an employee is off work (the ‘daily rate’) depends on how many ‘qualifying days’ they normally work each week.
Use GOV.UK’s Statutory Sick Pay calculator to work out how much SSP you should pay your employees.
Auto-enrolment workplace pensions
The current auto-enrolment threshold of £10,000 will remain in place for the 2024/25 tax year. This represents a real-terms decrease in the value of the earnings trigger for enrolment and contributions into a workplace pension.
Changes to holiday pay and entitlements
In November 2023, the UK Government announced reforms to holiday pay calculations and entitlement. Most of these came into effect on 1 January, but the following headline changes will apply to holiday years that begin on or after 1 April 2024:
- Introducing rolled-up holiday pay as an alternative way to calculate entitlement for irregular-hours workers and part-year workers
- A new accrual method for calculating holiday entitlement for irregular-hours and part-year workers in their first year of employment and beyond. It will be worked out as 12.07% of hours worked in a pay period
The reforms represent the most significant changes to holiday pay rules in recent years. You can read the full guidance on holiday pay and entitlement reforms online at GOV.UK
Your year-end payroll responsibilities as an employer
As a UK employer running payroll, you have several annual reporting responsibilities and tasks to fulfil at the end of every tax year. You must:
- Send your final Full Payment Submission (FPS) payroll report to HMRC on or before your employees’ final payday of the tax year. The tax year ends on 5 April.
- Update your employee payroll records from 6 April. This involves preparing a payroll record, identifying the correct tax codes to use in the new tax year, and entering each employee’s tax code in your payroll software.
- Update your payroll software from 6 April (or earlier if your provider requires you to do so). This is to ensure that your software uses the latest rates and thresholds for Income Tax, NICs, and Student Loan repayments.
- If you need to send a final Employer Payment Summary (EPS), this must reach HMRC by 19 April.
- Provide a P60 to each of your employees by 31 May. This summarises their total pay and deductions for the previous tax year.
- Report employee expenses and benefits to HMRC by 6 July.
- Pay any Class 1A National Insurance you owe on taxable employee expenses and benefits by 22 July.
Rates and thresholds should be hard-coded into your payroll software’s yearly updates. However, you still need to check to ensure that everything is correct in your 2024/25 payroll.
Thanks for reading
With so many year-end tasks to deal with in the coming weeks, it’s important to start preparing in good time and be aware of the rates, thresholds, and allowances to use for your 2024/25 payroll.
As mentioned, your payroll software will do a lot of the work for you, but be sure to double-check that everything is accurate, particularly employee tax codes and pay rates.
Post a comment below if you have any questions about this post. For more small business news and guidance, please visit the Quality Company Formations Blog.
