From April 2025 there are changes to UK Legislation that will impact UK payroll: updates include changes to the Employment Allowance, the introduction of Statutory Neonatal care leave and pay, as well as changes to statutory rates. These changes will affect employers and employees across Great Britain. Below is an outline and key details.
Employment Allowance update
In the Autumn 2024 Budget, the Chancellor announced that the Employment Allowance will increase to £10,500 from 6 April 2025. Additionally, the restriction that limited eligibility to employers whose previous annual NICs bill was below £100,000 will be removed. All other eligibility criteria remain unchanged.
In December 2024, HMRC confirmed that from 6 April 2025, the Employment Allowance will no longer count as de minimis state aid.
Statutory Neonatal Care Leave and pay update
A new statutory right (see attached document) to Neonatal Care Leave and Pay will come into effect from 6 April 2025, offering enhanced support to parents whose new-borns require neonatal care. This entitlement provides up to 12 weeks of paid leave in addition to existing parental leave rights.
Eligibility
- Applies to parents of babies admitted into neonatal care within the first 28 days from birth
- The care must last for at least seven continuous days
- Available in Great Britain only
What qualifies as Neonatal Care?
The legislation defines neonatal care as:
- Hospital-based medical care
- Palliative (end-of-life) care
Outreach care, provided that:
- The care began when the baby was discharged from hospital
- A consultant directs the care
- The hospital arranges ongoing monitoring by healthcare professionals
Leave and pay entitlement
- Each parent can take up to 12 weeks of leave
- This entitlement applies regardless of multiple births or multiple admissions
- The leave must be taken in blocks of at least one week
- Must be used within 68 weeks of the child’s birth
Statutory Neonatal Care Pay (SNCP)
The weekly rate for the 2025-26 tax year will be the lower of £187.18 or 90% of the employee’s Average Weekly Earnings. Employers can reclaim a proportion of Statutory Neonatal Care Pay, similar to other statutory payments. Employees on neonatal care leave are protected from discrimination, detriment, and dismissal and will continue to accrue annual leave and pay increases.
Next steps for employers
Minimum wage changes for 2025-2026
| Age | 2024/25 | 2025/26 | % Increase |
| 21 and over (NLW) | £11.44 | £12.21 | 6.7% |
| 18 - 20 | £8.60 | £10.00 | 16.3% |
| 16 -17 | £6.40 | £7.55 | 18% |
| Apprentice | £6.40 | £7.55 | 18% |
Employers should prepare for these legislative changes by:
- Reviewing HR policies to ensure compliance with the new leave entitlements
- Informing employees of their new rights and updating parental leave guidance
Statutory Rates from 6th April 2025
|
Statutory Payments
|
2024/25 Rate from 07/04/24 £ | 2025/26 Rate from 06/04/25 £ |
| Maternity Pay | 184.03* | 187.18* |
| Adoption Pay | 184.03* | 187.18* |
| Paternity Pay | 184.03* | 187.18* |
| Shared Parental Pay | 184.03* | 187.18* |
| Parental Bereavement Pay | 184.03* | 187.18* |
| Neonatal Care Pay | N/A | 187.18* |
| Sick Pay | 116.75 | 118.75 |
* Or 90% of the employees Average Weekly Earnings (AWE), whichever is lower.
Rates And Thresholds For Employers
Increase to small employers relief 2025-2026
The small employers relief (SER), Otherwise known as compensation rate, has been increased to 8.5% (108.5%). This rate previously been held at 3% (103%) since 2011. A small employer is defined as where the total NI Contributions were £45,000 or less in the last complete tax year, before the employees qualifying / matching week. The £45,000 threshold remains unchanged for 2025-2026. The 8.5% compensation rate will apply to all statutory parental payments.
Reminder: mandatory payrolling benefits come into effect from April 2026
From April 2026, payrolling benefits will become mandatory, except for employment-related loans and accommodation. This change, confirmed in the Autumn Budget 2024, aims to simplify tax administration. Employers can still voluntarily payroll loans and accommodation or continue using P11Ds for now, until a full transition timeline is set. Most Class 1A National Insurance contributions will be reported in real time, replacing the P11D(b). Form P46(Car) will be withdrawn, with data moving to FPS submissions. HMRC will publish guidance ahead of the changes and monitor the rollout during 2026–27.
Companies should begin preparation for this change as soon as possible.
For more details on how these changes impact your business, you can get in touch with our UK payroll experts at activpayroll.