April 2025 UK Payroll Update – Key Changes for Japanese Businesses, Expats, and Local Employers

April 2025 marks the start of a new UK tax year with several important payroll updates. These changes impact Japanese business operations in the UK, expat professionals on UK payrolls, companies with modified payroll structures, and local business employers alike. Below is a clear breakdown of the key changes and their implications, presented as a professional announcement for international and bilingual managers. National Insurance and Wage Updates Higher Employer NIC Rates: Employers’ National Insurance Contributions (NIC) increase from 13.8% to 15% as of April 6, 2025, while the secondary NI threshold (the salary level at which employers start paying NIC) drops from £9,100 to £5,000​.  This will raise payroll taxes for businesses (including Japanese companies in the UK and local firms) since more employee earnings will incur NIC at a higher rate. Companies should budget for higher employer NIC outlays and consider the impact on cost projections. Employment Allowance Boost: To partially offset rising NIC costs, the Employment Allowance (the annual credit against employer NIC) increases from £5,000 to £10,500, and the previous restriction (limiting it to smaller employers with NIC bills under £100,000) is removed​. This change offers relief especially to small and mid-size employers by reducing their overall NIC bill. For example, a qualifying local UK business or a Japanese-owned firm with a UK subsidiary can now claim up to £10.5k credit, which helps counter the NIC rate hike. Minimum Wage Increases: Wage floors are raised across all age groups from April 1, 2025. The National Living Wage for workers aged 21 and over rises to £12.21 per hour, up from £11.44​. The Youth Minimum Wage for 18–20 year-olds jumps to £10.00 per hour (a 16% increase)​, and the rate for under-18s increases to £7.55 per hour​.  Local employers in retail, hospitality, and other low-pay sectors must prepare for higher wage bills. Japanese businesses operating in the UK should review the pay of any junior staff or entry-level roles to ensure compliance with the new minimum wage rates​. Statutory Pay Rate Increases: From 6 April 2025, statutory pay rates have been adjusted, Statutory Sick Pay (SSP) increased to £118.75 per week.​ And Statutory Maternity, Paternity, Adoption, Shared Parental, and Bereavement Pay increased to £187.18 per week. ​ Employers should update their payroll systems and policies to accommodate these new statutory rates and ensure compliance with employment laws.​ Impact on Japanese Businesses and Expatriates: For Japanese companies operating in the UK and expatriate professionals, these changes necessitate a thorough review of compensation structures and employment contracts. Understanding the interplay between UK payroll obligations and home-country tax considerations is essential to maintain compliance and optimize tax efficiency. For One-Person Companies (Sole Director + Employee) The Employment Allowance still does not apply to sole-director companies. This means the full NICs increase will apply.   Example:

• Salary: £12,570 annually
• NICs Pre-April 2025: 13.8% on £3,470 = £478.86
• NICs post-April 2025: 15% on £7,570 = £1,135.50

      Annual NICs increase: £656.64 Recommendation With both NIC and minimum wages rising, employers are advised to review their compensation packages. This may be an opportune time to consider salary sacrifice arrangements or other tax-efficient benefits​. For instance, using salary sacrifice for pension contributions, commuter schemes, or electric vehicles can lower the NIC burden for both employer and employee. By restructuring pay (e.g., offering part of a bonus as an employer-provided benefit), businesses can help mitigate increased costs while still rewarding staff. Such strategies can benefit expats on UK payrolls as well, by optimizing their taxable income.   How CloudAcc Can Help If you are uncertain about how recent payroll changes may impact your company, we encourage you to reach out. Our team is ready to assist with payroll compliance, tax-efficient remuneration strategies, and managing UK-based operations. Please get in touch to arrange a consultation and plan confidently for the year ahead.   Jo Shichijo Relationship Executive Chartered Certified Accountants Address: 63 St Mary Axe, London, EC3A 8AA T: +44 (0)20 3861 8181 W: www.cloudacc.uk E: japandesk@cloudacc.uk This newsletter is for informational purposes only and should not be considered legal or professional advice. Accurate guidance can only be provided with a full understanding of the specific circumstances. If you would like to explore any topic in more detail, please do not hesitate to reach out to us.