If you are running a business that employs staff, you will know the importance of keeping up with the constant legislative changes to make sure your payroll is compliant. In this article one of our payroll experts, Sarah Gibbs, outlines the current payroll factors employers need to be aware of.
A reminder of National Living Wage (NLW) and National Minimum Wage (NMW) rates
Applicable since 1 April 2025, the current rates that all employers should be paying are:
- National Living Wage for employees aged 21 and over: £12.21/hr
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National Minimum Wage:
- Employees aged 18–20 years: £10.00/hr
- Employees under 18 years: £7.55/hr
- Apprentice rate for apprentices aged under 19 or aged over 19 and in their first year of apprenticeship: £7.55/hr
- Apprenticeship rate for apprentices aged 19 years and over AND have completed the first year of their apprenticeship: £12.21/hr
Why are there different rates for NLW and NMW?
The NLW is the highest tier of the statutory minimum wage, applied to those aged 21 and over.
The NMW varies by age and includes a specific apprentice rate, which is designed to reflect differing living costs and labour market circumstances for younger and less experienced workers.
HMRC's new online PAYE service
As part of its strategy to digitise the UK tax system, HMRC has begun rolling out its new online PAYE service, which will enable employees to check and update their income, allowances, reliefs, and expenses through their Personal Tax Account or the HMRC app.
Employers and payroll teams should prepare to support employees in accessing and using these digital services effectively.
Streamline PAYE payments with Direct Debit
Setting up a Direct Debit through your HM Revenue and Customs (HMRC) online account to pay your PAYE bill automatically, is a great way to simplify your payroll.
HMRC will automatically collect the payment from your bank account based on the amount in your return (also called a Full Payment Submission (FPS)). You’ll only need to set the Direct Debit up once.
Why you should consider setting up a Direct Debit for your PAYE:
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Improved cash flow control: Payments are only taken on the due date, meaning businesses can keep funds in their account for longer.
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Reduced risk of late payment: Once the Direct Debit is in place, it gives you the peace of mind that payments are collected automatically, helping avoid entering the wrong details, late payment penalties, and interest.
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Convenience and time-saving: No need to log in each month to make manual payments; HMRC collects the correct amount automatically, reducing the risk of underpayment or overpayment.
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Better financial planning: Knowing payments are scheduled allows for more reliable cash flow forecasting.
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Security: Payments are made through the Direct Debit Guarantee scheme, which further provides protection against errors.
Payrolling Benefits in Kind (BiKs) & ending P11Ds
The annual P11D system for reporting BiKs such as company cars, health insurance, etc. is moving to a new, 'Payrolling Benefits' system, which will see employees taxed in real time via payroll.
Initially announced to come into effect from April 2026, this has been delayed until April 2027 to give employers more time to prepare.
Employers should consider adopting a voluntary payrolling regime during 2026/27 as a trial, to avoid any last-minute disruptions when the new rules take effect from April 2027. To take part in this trial, you will need to register with HMRC before 6 April 2026.
The Employment Rights Bill: Notable changes affecting payroll
Several employee rights outlined in the Government's Employment Rights Bill (2024–25) will impact payroll. These include:
1. Right to request predictable working patterns (from September 2025)
Employees (including those on zero-hours or variable-hours contracts) with at least 26 weeks' service can request more predictable schedules.
Employers must respond and can refuse only for reasonable business reasons.
2. Unpaid carer's leave
The Carer's Leave Act 2023 came into effect on 6 April 2024.
Employees (from the first day of employment) can take up to one week of unpaid leave per year to care for a dependent with long-term care needs.
This leave can be taken flexibly (half-days allowed), with notice requirements based on the length of leave.
The Employment Rights Bill currently includes stronger flexible working rights, but does not yet mandate paid carers leave.
3. Day one rights from April 2026 including sick pay changes
The Employment Rights Bill also enforces day one rights, which can impact the payroll. The day one rights now protect employees from unfair dismissal, as well as paternity leave, unpaid parental leave, bereavement leave, and sick pay from the first day of employment.
The changes to Statutory Sick Pay (SSP) remove the three-day waiting period for sick pay, allowing employees to receive payment from their first day of illness. A further change also removes the Lower Earnings Limit (LEL), making more workers, including those with lower earnings or part-time hours, eligible for SSP. Low earners will receive SSP at a rate of 80% of their average weekly earnings, though the overall cap for SSP remains the same.
Read more about the changes in the Employment Rights Bill here
Neonatal care changes to payroll
The Neonatal Care (Leave and Pay) Act 2023, which took effect on 6 April 2025, grants eligible employees up to 12 weeks of leave and pay for their baby requiring at least seven continuous days of neonatal care within the first 28 days of birth.
This right is in addition to existing entitlements like maternity and paternity leave and applies from day one of employment, with pay at the statutory rate. Parents can take one week of leave for each full week their baby spends in a neonatal care unit or at home with specialist neonatal nurses/carers.
Taking the headache out of payroll
At Haines Watts, we understand that keeping on top of the constant changes distracts you from growing your business. We aim to build relationships and work with our clients, and ensure that no matter what challenges lie ahead, we can help them and their business to find the best way forward.
Our team is here to help you understand how these changes impact your specific situation. For tailored advice, reach out to one of our experts today. Simply click below to schedule an introductory chat about how we can help take the hassle out of payroll for your business.
