Legislative Changes for the Tax Year 2025-26
Here's the summary of legislative changes for the UK for the tax year 2025-26.
| Item | Updates |
|---|---|
| rUK Rates of Income Tax and Thresholds | The thresholds and rates used in the calculation of PAYE for rUK for the tax year 2025-26 remain unchanged and are the same rates used for 2024-25. |
| Welsh Rates of Income Tax | There are no additional changes for Wales for 2025-26. |
| Scottish Income Tax | The Scottish government has announced changes to some of the bands used in the calculation of Scottish Income Tax. |
| Income Tax Personal Allowance |
The Income Tax Personal Allowance is frozen at £12,570 for the tax year 2025-26. The emergency tax code remains as 1257L. |
| National Insurance Thresholds |
The Lower Earnings Limit is increased, and the Secondary Threshold reduced for National Insurance contribution calculations for the tax year 2025-26. The Secondary Threshold in now less than the Lower Earnings Limit |
| National Insurance Rates - Employee | The percentages used to calculate employee contributions will be frozen from April 6, 2025, for the tax year 2025-26. |
| National Insurance Rates - Employer | The percentage used to calculate employer contributions are increased from April 6, 2025, for the tax year 2025-26. |
| Statutory Payments |
The rates have changed from April 6, 2025. Run Evaluate Absences process to update rates for existing absences. For more information, see Information Center: Fusion Human Capital Management – United Kingdom (Doc ID 2999455.1). |
| National Insurance Compensation Rate for Statutory Payments |
The standard recovery rate remains at 92%. A recovery rate of 100% is available to employers whose total Class 1 NI bill for the previous tax year is below the Small Employers Relief threshold (£45,000). In addition, employers eligible to reclaim 100% can claim NIC compensation. The NIC compensation rate increases from 3% to 8.5% for the tax year 2025-26. This change applies to statutory payment weeks beginning on or after April 6, 2025. |
| Student Loans and Postgraduate Loans |
The annual thresholds used to calculate Plan 1, Plan 2 and Plan 4 Student Loan deductions are increasing from April 6, 2025. The annual threshold for Postgraduate Loan deductions will remain frozen. The actual calculation method remains unchanged. These apply to existing and new student loans. The deduction rates calculated on earnings above the thresholds are unchanged and remains at 9% for Student Loans and 6% for Postgraduate Loans. |
| Payrolling of Benefits for 2025-26 |
The appropriate percentages for the tax year 2025-26 will be applied for cars with an approved CO2 emissions figure.
There are changes to these benefits:
|
| P46(Car) 2025-26 | There are minor change to update the tax year. |
| Pensions Automatic Enrolment | The automatic enrolment earnings trigger and qualifying earnings bands are maintained at their 2024-25 values for the tax year 2025-26. |
| Scottish Earnings Arrestment | The ranges and rates have changed from April 6, 2025 because of various factors impacting the overall cost of living. |
| Scottish Current Maintenance Arrestment | There's an increase to the daily protected earnings for Current Maintenance Arrestment from £21.56 to £24.66 effective April 6, 2025. You need to manually update the daily protected earnings rate element input value, if required. |
Stay compliant with legislative changes required for the tax year 2025-26, The updates include all the prescribed changes to rates, thresholds and percentages for Income Tax, National Insurance deductions, and other changes that would be effective for rUK, Wales, and Scotland from April 6, 2025.
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For more information, see Payroll Legislative Updates 2025-26 in the Information Center: Fusion Human Capital Management - United Kingdom (KA143).