Academy Training Payroll Pulse – December Edition
Welcome to Payroll Pulse, the only blog where payslips come alive and payroll teams get their moment in the spotlight!
Academy Training Payroll Pulse – December Bumper Edition 2025
“’Tis the season to be… payroll compliant!”
December has arrived, and with it comes twinkly lights, festive jumper days… and the biggest set of Budget announcements we’ve had in years. This month’s Payroll Pulse is an extra-large helping of news, updates, and changes that payroll professionals need on their radar before we step into 2026.
So grab a mince pie, open your year-end checklists, and settle in — this one’s a cracker!
Budget Bonanza: What the Chancellor Just Announced
The November Budget brought a long list of tax, NIC, benefit and employment changes, many with big implications for payroll. Let’s unwrap the key announcements…
Income Tax & National Insurance Threshold Freeze Extended
The Chancellor confirmed that:
• The freeze on income tax and NIC thresholds will be extended until 2030–31.
• The personal allowance remains at £12,570, unchanged since 2021.
This long freeze is often referred to as a “stealth tax” — as wages rise, more employees are pulled into higher tax brackets despite no rate increase.
Note: Scotland will set its own income tax thresholds shortly; Wales currently aligns with the UK.
Minimum Wage Rates (from April 2026)
Announced on Budget Eve and accepted in full from the Low Pay Commission:
• National Living Wage (23+) → £12.71 (↑ 4.1%)
• 18–20 rate → £10.85 (↑ 8.5%)
• 16–17 rate → £8.00 (↑ 6%)
• Accommodation offset → £11.10
The LPC’s 2025 summary of evidence has now been published.
Student Loans
The repayment threshold for Plan 2 loans will remain frozen at £29,385 until 2029–30. More graduates entering repayment is expected.
State Pension Rise Announced
The state pension will rise by 4.8% from April 2026, in line with wage growth, continuing the Government’s commitment to the triple lock.
Important change:
From 6 April 2026, SSP will no longer use the LEL as an eligibility trigger, thanks to the Employment Rights Bill.
Employment Rights Bill – Almost There
The Bill continues through final amendment stages. Key points now confirmed:
• Unfair dismissal rights will apply after 6 months, not day one.
• Day-one rights remain planned for:
o Statutory Sick Pay
o Parental leave
Implementation expected April 2026.
Mandatory Payrolling of Benefits in Kind – April 2027HMRC has released interim guidance and draft legislation for mandatory real-time payrolling of BiKs.
The guidance covers:
• Default operation
• Real-time reporting
• Handling leavers
• Penalties
• P60/ P45 changes
• New FPS fields
• BiK examples
• Mergers, acquisitions and payroll moves
The Academy Training Policy Team will analyse this in detail — but for now, payroll teams should begin planning for software and process changes.
Homeworking Tax Relief Abolished (for employee claims)
From 6 April 2026, employees will no longer be able to claim tax relief directly for homeworking expenses.
Employers, however, can still reimburse costs tax-free where eligible.
Employee Car Ownership Schemes (ECOS) – Delayed
Originally planned for April 2026, ECOS will now come into scope of BiK rules from April 2030, with transitional arrangements to 2031.
Self-Assessment – PAYE Integration Coming 2029
From April 2029, taxpayers who have both PAYE income and Self-Assessment income will pay their SA liability through PAYE in-year.
This aims to prevent large year-end bills and improve timely payments. A consultation will open in early 2026.
Salary Sacrifice NI Relief Capped at £2,000 (from April 2029)
A significant change:
• NI relief on salary sacrifice pension contributions will be capped at £2,000 per year.
This increases employer NIC costs and may discourage higher pension contributions. The CIPP is already raising concerns with Government.
Tax/NIC Exemption Extended for Reimbursements (from April 2026)
Employers will be able to reimburse employees tax and NIC-free for:
• Eye tests
• Flu jabs
• Homeworking equipment
Currently, only direct provision qualifies — reimbursements do not.
Plug-in Hybrid Vehicles – Temporary BiK Easement
If new emissions standards are introduced in GB from 2026, the Government will legislate for a temporary easement (2026–28) to soften large BiK increases.
In NI, the easement will apply retrospectively from January 2025.
NIC Relief for Hiring Veterans Extended to 2028
Employer NIC relief for veterans in their first civilian role has been extended to April 2028.
Inflation, Interest Rates & HMRC Charges
• Inflation fell to 3.6% in October.
• The Bank of England held the base rate at 4%, though 4 members voted for a cut.
• HMRC interest rates will therefore remain:
o Late payment interest: Base + 2.5%
o Repayment interest: Base – 1% (minimum 0.5%)
The next rate announcement is due 18 December.
December Payroll Priorities
December wouldn’t be December without:
• Early pay dates
• RTI warnings
• “But why is my tax higher?” questions
• Managers suddenly remembering seasonal bonuses
Don’t forget:
Even if pay is released early, you must report the contractual pay date to HMRC.
Payroll Riddle Time!
Last month’s riddle:
“I’m calculated with care, though I’m rarely a thrill.
I climb as you earn, but drop when you’re still.
I fill up the coffers, though few shout hooray — what am I?”
Answer:
National Insurance contributions
This month’s festive puzzle:
“I change every April, though not always the same.
I can make payslips tricky — that’s part of my game.
I rise when advised, though never by chance…
Payroll awaits me — I tell them to dance. What am I?”
(Answer in the January Payroll Pulse!)
Final Thoughts – Wrapping Up 2025
From minimum wage increases to future BiK reforms, frozen thresholds to uprated pensions, this December has delivered a historic wave of payroll changes.
But as always, payroll professionals rise to the challenge with accuracy, resilience, spreadsheets… and maybe a little chocolate.
Thank you for everything you’ve done this year.
Stay warm, stay festive, and stay payroll proud.
From all of us at Academy Training — Happy December! 🎄✨
