Are you prepared for payroll changes in the 2025/26 tax year?

As we approach the 2025/26 tax year, payroll professionals and business owners must be ready for significant changes that could impact employment costs, compliance and employee benefits.

From increased employer national insurance (NI) contributions to new leave entitlements, staying on top of these updates and having the right payroll provider is important.

Key payroll changes

1. Employer National Insurance increases

One of the most impactful payroll changes for the upcoming tax year is the increase in employer NI contributions. From April 2025, the rate will rise by 1.2 percentage points, from 13.8% to 15%.

The secondary threshold will also be reduced from £9,100 to £5,000. These changes will result in higher employment costs for businesses, with an estimated additional expense of £615 per employee earning above the new threshold.

Eligible businesses will want to make sure they minimise the impact of these changes with the more generous Employment Allowance and accountants will want to make sure businesses understand how to ensure they take advantage of the increase, in particular the removal of the £100,000 threshold will mean more employers can claim the allowance.

Employers should start reviewing their payroll costs now, adjusting budgets where necessary and considering tax-efficient salary sacrifice arrangements that could help offset some of these increased costs. It will also be important to communicate these changes to employees to maintain transparency and prepare for any concerns they may have.

2. National Minimum Wage increases

Another adjustment in April 2025 will be the increase in national minimum wage (NMW). These increases will significantly affect businesses, particularly those in retail and hospitality, which employ large numbers of younger workers.

Payroll systems need to be updated in time to reflect the new rates and that any salary sacrifice schemes in place do not inadvertently lower an employee’s pay below the required minimum.

It may also be necessary to review existing employee contracts and agreements to guarantee compliance with the revised wage thresholds.

3. Neonatal care leave and pay

A further update that businesses need to prepare for is the introduction of neonatal care leave and pay which has been confirmed from 6 April 2025.

This new policy will provide additional paid leave for parents whose babies require neonatal care. Employers must ensure that their payroll systems can process these payments correctly, and HR policies should be updated to incorporate this entitlement. Clear communication with employees about their rights under this new policy will also be essential.

Reliable payroll providers keep you compliant with payroll changes

With these legislative changes coming into effect, businesses need a payroll provider that delivers compliance, efficiency and flexibility.

BrightPay’s cloud payroll software is designed to automatically update in line with legislative changes, giving businesses peace of mind that their payroll remains compliant. As tax rules and employment regulations come into effect, BrightPay’s development teams react in real time, implementing changes as they happen.

Beyond compliance, BrightPay offers a cost-effective and scalable solution. Businesses only pay for what they use, with the option to upgrade as their needs grow, ensuring they always get the best value for their payroll processing.

*Use BrightPay’s pricing calculator to learn how much your licence costs.

Switching to BrightPay is an easy process with a dedicated support team on hand to assist every step of the way. With a reliable provider like BrightPay, businesses can future-proof their payroll processes.

Switching your payroll software? Challenges you may face and how to overcome them

Engage with your clients now

February is the ideal time for payroll professionals to reach out to their clients to make sure they understand the upcoming changes and their potential impact. By initiating these conversations early, businesses can make informed decisions about salary structures, budget allocations and compliance requirements.

A thorough review of payroll processes at this stage will allow companies to identify any potential issues before they arise. Making the necessary adjustments in advance will help businesses manage increased employment costs, remain compliant with new regulations and explore tax-efficient payroll strategies.

Switch to BrightPay to stay compliant with the 2025/26 payroll changes

Updating payroll software ahead of the April deadline is also usually a smoother transition if done before the new tax year. With the right provider in place, businesses can navigate these changes confidently, minimising risks and keeping payroll operations running smoothly.

Proactive preparation now will help businesses stay compliant, control costs and set themselves up for success in the 2025/26 tax year.

Don’t wait until April — stay ahead of the changes and future-proof your payroll today with BrightPay. Start your free trial or book a demo now!

This content may have been developed with the assistance of AI tools. Content is reviewed by a member of the Bright team before publication. Guidance on legislation can be obtained from your industry body.