What's new?
With the 2024-2025 tax year coming to an end. HMRC has released the new 2025-2026 legislation updates. Below are all the items that Paycircle has implemented to stay compliant for the new tax year.
YE 25/26 → Employment Allowance increase
With the legislative changes for the 2025/26 tax year, the Employment Allowance will increase from £5,000 to £10,500 annually, effective 6 April 2025. Additionally, the £100,000 eligibility threshold will be removed, broadening access to the allowance unless the employer only pays a single director.
Update the Employment Allowance rate across all impacted calculations, documents, and reports.
Ensure calculations account for diverse scenarios, including companies reaching or not reaching the annual maximum allowance.
Incorporate changes into statutory submissions such as the EPS, including appropriate indicators for mid-year updates.
YE 25/26 → RTI Schema updates
Implementing updates to the RTI submission schema for the 2025/26 tax year, ensuring compliance with legislative changes. This includes existing fields, validation rules, error conditions, and the addition of new fields for FPS and EPS submissions. Key updates include introducing validations for NI Letters and addressing issues in importer functionality to improve user guidance and clarity.
Implement RTI schema updates for 2025/26 in line with HMRC specifications, including new validations and error conditions.
Add robust validations to the importer to prevent errors like invalid NI Letters
Provide clear error messages and warnings to guide users in resolving issues quickly during data entry or import.
YE 25/26 → Rates and Thresholds
Payroll Legislation is updated annually, requiring software to be up to date to ensure the accurate processing of payroll data.
Student Loans - Plan 1,2,3
Income Contingent Student Loans for Plan 1 (1998-2012) undergraduate loans
Plan 1 student loan interest is set at the lower of RPI (4.3%) or the Bank Base Rate + 1%. Since RPI is lower, the interest rate will be 4.3% from 1 September 2024 to 31 August 2025, unless the Bank Base Rate decreases. The repayment threshold will increase to £26,065 from 6 April 2025 to 5 April 2026.
Income Contingent Student Loans for Plan 2 (2012-2023) undergraduate loans
Plan 2 student loan interest rates range from RPI to RPI +3%, depending on circumstances, with a cap based on the Prevailing Market Rate. For 1 September 2024 to 31 August 2025, RPI is 4.3%. The repayment threshold will increase to £28,470 from 6 April 2025 to 5 April 2026.
Company Car Benefit Rates
Diesel car drivers must add 4% to their appropriate percentage, capped at 37% until 2027–28, 38% in 2028–29, and 39% in 2029–30.
Company Car and Van Fuel
From 6 April 2025, the van benefit charge will be £4,020, increasing by £60 from £3,960. The van fuel benefit charge will rise to £769, an increase of £12 from £757. The car fuel benefit charge multiplier will be £28,200, up by £400 from £27,800.
Class 1A and 1B contributions
The government will introduce legislation to increase the main rate of secondary Class 1 National Insurance contributions from 13.8% to 15%. The Class 1A and Class 1B employer rates will also increase in line with this.
YE 25/26 → Adding a workplace postcode for Freeport or Investment zone employees
New legislation mandating that employers operating in Freeport or Investment Zone areas must provide employees' workplace postcodes to HMRC when claiming secondary Class 1 National Insurance contributions (NICs) relief.
The feature introduces a new field to capture the employee's workplace postcode for employees in these categories. It ensures compliance with the legislation by allowing users to fill in the postcode for new and existing employees and integrates the information into the Full Payment Submission (FPS) process. Additionally, it incorporates necessary validations, including a new error condition to ensure postcodes are provided for specific NI letters.
YE 25/26 → Statutory Neonatal Care
A new bill has been passed to introduce Neonatal Care Pay for parents of children who require Neonatal Care within 28 days from birth. Neonatal Care Pay will comprise one week of statutory pay for every week the child spends in neonatal care, up to a maximum of 12 weeks, to be taken within 68 weeks of the child's birth. This is in additional to existing parental leave and pay.
This feature introduces support for Statutory Neonatal Care Pay (SNCP) in Paycircle. It encompasses functionality to add, calculate, track, and report on SNCP across key payroll operations, ensuring compliance with legislation effective for the 2025/26 tax year. This includes new database fields, pay elements, and reporting capabilities to manage SNCP efficiently for both employers and employees.
How to access the update
These updates are live! 🎉✨