Payroll transformation ahead 

April is on the doorstep and that means a suite of changes for payroll and HR professionals to deal with. The CIPP policy team keeps on top of all the legislative and policy implementation you need to be aware of.

New tax year 

It may be that your chosen software provider gives a checklist or a workflow process to make sure you’re ready for the next tax year, but if not, create one this year, and once it’s done, you can reuse it every year.

If you use Cloud based software, it may auto update for you. If your software is server / desktop based, you’ll likely need to manually update the version you’re using.

The responsibility for changes being implemented correctly within the payroll software ultimately lies with the payroll professionals using that software, so it’s crucial that relevant testing and reviews are conducted ahead of implementation.

National Insurance

There are incoming changes to Employers (secondary) National Insurance contributions (NICs) for the 2025/26 tax year. Employers will now pay 15% in secondary NICs, and the threshold at which they must start paying secondary NICs will now be £5,000, a drop from £9,100 which has been in place for the last three tax years.

CIPP highly recommends employers to claim Employment Allowance (EA) in 2025-26, which from the new tax year is available to more employers than ever, since the £100,000 threshold for claiming the EA has been removed.

An added bonus to the EA is the amount employers can claim, which has increased to £10,500 (from £5,000) in the new tax year. However, you need to ensure you comply with the rules around linked companies, so if you are part of a group, check you don’t claim multiple allowances across connected companies.

National Minimum Wage 

This year will see another increase in minimum wage rates, and while that’s great news for some employees, it brings additional considerations for payroll professionals.

Rates from 1st April 2025 are:

•  National Living Wage (21 and over) - 6.7% increase to £12.51
• 18-20 Year Old - 16.3% increase to £10
• 16-17 Year Old Rate - 18% increase to £7.55
• Apprentice Rate - 18% increase to £7.55
• Accommodation Offset -  6.7% increase to £10.66 

This is the perfect opportunity for a review, to ensure that your employees with salary sacrifice agreements have post salary sacrifice pay over the minimum wage and that no other deductions are impacting your NMW compliance.

Our advisory team has seen an increase in questions regarding salary sacrifice and its impact on NMW, indicating the complexity of the issue.

CIPP highlights the importance of compliance with NMW regulations, especially with the transition to new rates. We urge employers and agents to get their payroll processes ready for 1st April 2025 and emphasise the importance of compliance, especially around salary sacrifice. 

Please remember new rates of National Minimum Wage (NMW) for 2025 come into effect for pay reference periods starting on or after 1 April, as per the National Minimum Wage regulations 2015, regulation 4(2). 

In practice, this means that some workers may not receive the new NMW rates from the 1st April. An example of this would be a weekly payroll, where the pay reference period runs from a Saturday – Friday. For the period that runs from:

•       Saturday 30 March – Friday 5 April; the new NMW would not be payable

•       Saturday 6 April – Friday 12 April; the new NMW would be payable.

Employers can always go over and above the regulations if they wish, so the new rates can be paid from the 1st April.

The CIPP is here to make sure payroll is at the centre of everything we do, so whether you need support through membership, qualifications, training or consultancy, get in touch.