Payroll Resolutions for the New Year: Celebrating Success and Planning Ahead

With the UK Government Autumn Budget 2024 presented on 30th October 2024, several changes and proposals were announced that will be applicable for the UK New Tax Year starting in 2025, and some with confirmation for 2026. So, plenty of time to not worry about them. Or should we start to set some New Year’s resolutions and plan on thinking about changes required in preparation? It may not be as easy as we may think.

A high financial impact change is the significant increase to employers’ secondary NI contributions and the starting point secondary threshold also dropping, the double whammy.

Payroll can play a key role in readying business planning.

One means to reduce the employer liability is expanding salary sacrifice. Although hints were high about the government restricting employment pension scheme entitlements and a potential for employers facing a National Insurance charge on their contributions, these didn’t happen and there is potential for taking advantage (until some future point when they are changed). So a key area that may be worth exploring is being smart about pensions and the introduction of pension salary sacrifice. Whereas National Insurance costs have gone up, equally the employer saving on salary sacrifice pensions on the secondary NI liability saved increases also.

However, there are constraining challenges for those who have groups of low-pay workers.

Another of the other changes for a resolution is to plan and assist in the further increases in National Living Wage and National Minimum Wage impacts. Still, large groups of employers find themselves in ‘technical’ breaches being shamed. Set a resolution to be part of awareness to prevent
employers’ shame.

Another area is preparing the business for changes in employment rights. The new Fair Work Agency will, in addition to minimum pay, be policing Holiday Pay and rights to Statutory Sick Pay. Resolve to consider what the impacts are on the business and payroll of the extension to employment rights and various new worker protections.

April 2026 could see new Statutory Sick Pay rules: away with the 4-day PIW and in with SSP rights from day 1; Away with the Lower Earnings Limit test; and in with SSP being paid at a percentage of average earnings up to a capped weekly ceiling amount.

Set a resolution to plan for the change to both the business processes and payment. These changes also coincide with a phased return to work from sickness although this will still be judged in terms of full days.

With Payrolling Benefits confirmed as mandatory from April 2026, we end up with a 2026 double whammy as P11Ds need to be filed at the same time as payrolling needs to commence, one looking to the past and the other looking to the future.

Of course, formal payroll has existed since April 2016. Now, with it being compulsory for payroll professionals, their employer may want to not wait and go early. So another good New Year’s resolution topic for the payroll professional is to have a goal to prepare and go for an April 2025 start point for a live practice event. There is much to prepare and plan to ensure that benefit providers are ready to provide data upfront as opposed to the current tardiness of in-arrears data provision.

Although delayed from the proposed April 2025 start point, it is likely that working hours will still need to be collected and reported to HMRC from April 2026. Does payroll receive this information, and how will the data be collected and accurately reported?

With all this in mind, payroll professionals would be well-minded to set some professional New Year’s resolutions!

Set a resolution to plan for the change to both the business processes and payment. These changes also coincide with a phased return to work from sickness although this will still be judged in terms of full days.

Sign up to our upcoming webinar 'Prepare for 2025' to gain an in-depth overview of the UK government changes, detailing how you and your business can get ready as they impact employee pay and organisational compliance.