Minimum wage rates rose on 1 April 2025. NLW now £12.21, and big increases for younger workers too. Make sure you're compliant – underpayment can cost up to £20K per worker and a director ban. Time to check your payroll!

Employers must ensure they are paying staff at least the National Minimum Wage (NMW) or National Living Wage (NLW). The NMW and the NLW are the minimum legal amounts that employers must pay their workers.

The new NMW and NLW rates came into effect on 1 April 2025. The NLW rate has now increased from £11.44 to £12.21. This represents an increase of 77p or 6.7%. The NLW is the minimum hourly rate that must be paid to those aged 21 or over. The increase represents a pay rise of over £1,400 a year for someone working full-time and earning the NLW.

The NMW (for 18-20 year olds) has increased from £8.60 to £10.00 an hour. This is largest increase ever in the NMW (a whopping 16.3% increase) that means younger workers having their pay boosted by up to £2,500 a year. This increase is part of a move to narrows the gap in wage rates for 18-20 years olds and the NLW and ultimately create a single adult wage rate for all those aged 18 and up. 

The NMW rates for 16 to 17 year olds increased from £6.40 to £7.55 – an increase of £1.15 or 18% per hour. The Apprentice Rate mirrors this increase.

It is important that employers ensure they have updated their wage rates and that they pay the legal minimum wage rates. There are significant penalties for employers who are found to have paid workers less that they are entitled to by law. If an employee has been underpaid, the employer must pay any arrears without delay. There are penalties for non-payment of up to 200% of the amount owed. The penalties are reduced by 50% if all of the unpaid wages and 50% of the penalty are paid in full within 14 days.

The maximum fine for non-payment can be up to £20,000 per employee and employers who fail to pay face up to a 15-year ban from being a company director as well as being publicly named and shamed.

Tax thresholds frozen till 2028? That’s fiscal drag in action – more tax paid without rate rises. It’s a stealthy revenue boost for HM Treasury, projected to bring in £38bn a year by 2029. Inflation and pay rises make it worse.

The freezing of tax thresholds often results in a phenomenon known as fiscal drag. When tax thresholds remain static, taxpayers find themselves paying more tax as their earnings increase, without receiving a corresponding rise in tax allowances. Consequently, more individuals are "dragged" into higher tax brackets or start paying tax for the first time, essentially functioning as a hidden or stealth tax. In the UK, several tax thresholds—particularly for Income Tax—have been frozen since April 2022 and are set to remain unchanged until April 2028.

While fiscal drag is not an unusual occurrence, its impact is influenced by three critical factors: the government's setting of thresholds and allowances, inflation, and wage growth. How these thresholds are determined is especially significant during periods of high inflation.

Adjusting tax thresholds to align with inflation or another index is referred to as "indexation." The government’s approach of increasing certain thresholds each year based on inflation is called "uprating." However, this policy is not consistently applied. When thresholds are frozen, tax revenues increase for HM Treasury without the need for any adjustments in tax rates. According to the latest estimate from the Office for Budget Responsibility (OBR), the freeze on Income Tax thresholds is projected to generate an additional £38 billion annually by 2029-30.

Do you know what your 2025–26 tax code means? It affects how much tax is taken from your pay or pension. Check now to make sure you're on the right code and not overpaying! Here's what the letters and numbers really mean.

You can find your tax code:

• by checking your tax code for the current year online – you’ll need to sign in to or create an online account
• on the HMRC app
• on your payslip
• on a ‘Tax Code Notice’ letter from HMRC if you get one

The tax codes are updated annually. The basic personal allowance for the 2025-26 tax year is £12,570. The corresponding tax code for an employee entitled to the standard tax-free Personal Allowance 1257L. This is the most common tax code and is used for most people with one job and no untaxed income, unpaid tax or taxable benefits (for example a company car).

There are a lot of other numbers and letters that can appear in your tax code. For example, there are letters that show where an employee is claiming the marriage allowance (M) or where their income or pension is taxed using the Scottish rates (S). If your tax code numbers are changed this usually means your personal allowance has been reduced.

There are also emergency tax codes (W1 or M1) which can be used if a new employee doesn’t have a P45. These codes mean that an employee’s tax calculation is based only on what they are paid in the current pay period.

If your tax code has a 'K' at the beginning this means that deductions due for company benefits, state pension or tax owed from previous years are greater than your personal allowance. However, the tax deduction for each pay period can’t be more than half your pre-tax pay or pension.

It is important to check your 2025-26 tax code to ensure the correct information is being used. 
 

From April 2025, updated ATED rates apply to residential properties held by companies and other Non-Natural Persons (NNPs). Make sure returns and payments are submitted by 30 April to avoid penalties. Reliefs may apply for commercial use.

The Annual Tax on Enveloped Dwellings (ATED) applies to NNPs who own interests in residential properties valued over £500,000. These provisions specifically affect entities such as companies, partnerships with company members, and managers of collective investment schemes, which are all classified as NNPs under the legislation.

Individuals who own property directly (rather than through a company) are not subject to ATED or ATED-related Capital Gains Tax (CGT). Furthermore, certain reliefs may be available if the property is used for commercial purposes.

Since 1 April 2025, ATED is charged based on the following property value bands:

For properties that were subject to ATED on 1 April 2025, both the return and payment must be submitted by 30 April 2025, covering the ATED period from 1 April 2025 to 31 March 2026. If a property is acquired after 1 April and falls within the scope of ATED, payment is due within 30 days of acquisition.

Penalties may be imposed for late filing, late payments, or inaccurate returns. Taxpayers have 30 days to appeal HMRC decisions, including penalties or determinations, by providing the grounds for the appeal.

Small gifts can mean big tax savings! Use the trivial benefits exemption in 2025–26 to reward employees with non-cash perks under £50 – no PAYE, no P11D, and no NIC. A smart, simple way to say thanks.

The rules providing trivial benefit payments provide a great opportunity to give small rewards and incentives to employees in the new 2025-26 tax year. The benefit-in-kind (BiK) trivial exemption applies to small non-cash benefits like a bottle of wine, or a bouquet of flowers given occasionally to employees or any other BiK classed as 'trivial' that falls within the exemption.

By taking advantage of the exemption employers can simplify the treatment of BiKs whilst at the same time offering a tax efficient way to give small gifts to employees. The employer also benefits as the trivial benefit payments do not have to be included on PAYE settlement agreements or disclosed on P11D forms. There is also a matching exemption from Class 1A National Insurance contributions.

The tax exemption applies to trivial BiKs where the BiK:

• is not cash or a cash-voucher; and
• costs £50 or less; and
• is not provided as part of a salary sacrifice or other contractual arrangement; and
• is not provided in recognition of services performed by the employee as part of their employment, or in anticipation of such services.

The rules also allow directors or other office-holders of close companies and their families to benefit from an annual cap of £300. The £50 limit remains for each gift but could allow for up to £300 of non-cash benefits to be withdrawn per director or shareholder per year. The £300 cap doesn’t apply to employees. If the £50 limit is exceeded for any gift, the full value of the benefit will be taxable.