Preparing For Payroll Year-end & 2025-26 Updates

As the payroll year draws to a close, now’s the time to get ahead and make sure the transition into the new year runs like clockwork! A little prep now will save a lot of hassle later. Below, we’ve pulled together the key things you need to check off for the 2024-25 payroll year-end, plus some big changes coming in 2025-26 that you’ll want to be ready for.

A note to our  Henderson Loggie Payroll Bureau clients  – in the coming weeks we will contact you to ask you to review your employee data, confirm eligibility for employment allowance, and review the apprenticeship levy position (where there is more than one payroll or a group of companies) We would really appreciate a prompt response to these communications so we can be as prepared as possible.!

Stay tuned—our full update on rates and allowances for the new tax year will be with you soon!

Preparing for Payroll Year-End

Advance preparation is key to a seamless year-end process. Here’s what needs to be reviewed ahead of the final pay period:

Employee Data Check

• Ensure all employee addresses are correct. This is crucial for issuing accurate P60s.
• Verify that working patterns, contracted hours, hourly rates, and salaries are correctly recorded.

Review ‘On Hold’ Employees

• Do you have employees on payroll who haven’t worked for a long time? If so, review their situation and consider adding a leave date where appropriate.

Payrolled Benefits in Kind

• While not yet mandatory, we encourage employers to consider voluntary registration for payrolling benefits in 2025-26 to prepare for the mandatory requirement from 6 April 2026. Learn more in our webinar here.

Additional Considerations for In-House Payrolls

• Ensure you have installed the latest year-end software update.
• Determine if you have a week 53 this year ( applies this year if your regular payday falls on a Saturday).
• Process your final pay period and review year-end values.
• For directors, remember the annual National Insurance recalculation in the final pay period.
• Submit your final FPS and, if required, EPS, and complete year-end tasks in line with your payroll software provider’s guidance.

Important Deadlines

• The payroll year-end process must be completed by 19 April 2025.
• P60s must be issued to employees by 31 May 2025.
• Registration for voluntary payrolling benefits in kind by 5^th April 2025

Key Considerations for the 2025-26 Payroll Year

Employment Allowance

• From April 2025, the Employment Allowance will increase from £5,000 to £10,500, offering greater savings for eligible employers.
• The current restriction preventing employers with secondary Class 1 NICs over £100,000 from claiming will be removed from 6 April 2025, expanding eligibility.
• Remember: Only one company within a group (or with connected companies) can claim the allowance.

Apprenticeship Levy

• Employers with a payroll exceeding £3 million must continue paying the 0.5% Apprenticeship Levy.
• The annual £15,000 levy allowance applies across connected companies. The decision on how to allocate this must be made at the start of the tax year and cannot be changed mid-year.

National Minimum Wage (NMW) Increases from 1 April 2025

• Employers must ensure they are meeting NMW requirements, which extend beyond just the hourly rate.
• Be cautious of salary sacrifice schemes, uniform deductions, and unpaid working time, which could inadvertently lead to NMW breaches.
• Learn more in our webinar here.

Payrolled Benefits in Kind

• Many employers have already opted for voluntary registration ahead of the mandatory requirement from 6 April 2026.
• This change will largely phase out P11Ds, streamlining benefit reporting.
• If you missed our webinar on this topic, watch it here.

Employer National Insurance Increase

• From April 2025, Employer NICs will increase by 1.2 percentage points, from 13.8% to 15%.
• The secondary threshold will reduce from £9,100 to £5,000, increasing payroll costs for many employers.
• Employers should assess budgets and consider tax-efficient salary sacrifice arrangements to offset some of these costs.
• Transparent communication with employees will be key to managing expectations.
• See our article on rising employment costs here.

Directors’ Remuneration Update

• With the reduction in the Employer’s Secondary Threshold for 2025–26, employers will begin paying Class 1 secondary National Insurance Contributions (NICs) on earnings above a lower threshold than before.
• Employer NICs will apply to all earnings exceeding £5,000 per annum.
• However, salaries below the Lower Earnings Limit of £6,500 do not provide NI benefits, such as qualifying payments towards the State Pension.
• The tax-optimal salary for directors in owner-managed businesses may need to be reviewed to maintain employer NIC efficiency. Keep an eye out for our full article on this which will be coming soon.

Next Steps We strongly encourage all employers to start preparing now for these changes. Our team is here to help – if you have any questions or require support, please get in touch.

A full update on rates and allowances for 2025-26 will follow soon.

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