GH Payscheme – Payroll update: January 2025

When it comes to business operations, maintaining compliance and efficiency when managing payroll is essential.

Whether you are a small business owner, or part of a much larger organisation, understanding legislative and policy updates is imperative if you are to keep on top of your obligations, sustain employee satisfaction and streamline your administration.

Changes, whilst not always straightforward, can bring opportunities to fine-tune your payroll processes, and our payroll specialists can help you along the way, simplifying payroll management and processing, and helping you to adjust to new requirements with confidence.

This latest payroll update covers important changes that may affect your business and employees, including employee tax codes, mandatory payrolling of benefits and student loan thresholds.

Employee tax codes

HM Revenue & Customs (HMRC) is encouraging employers to tell employees about the HMRC app, which can be used to check how much tax they are paying, why their tax code has changed, and update any incorrect details.

Unexpected changes in the tax employees pay can happen if the information that HMRC hold is incorrect, and may be more common when an employee:

• Started a new job
• Has more than one job
• Had a change in their employment income
• Had a change in their company benefit (such as a company car, or medical insurance)
• Had a change in their pension income.

Employees can download the HMRC app from their app store, or by visiting GOV.UK/HMRC/app, and can sign in using an existing account or by creating a new account if they have not done this before. They will need to provide basic information and prove their identity in order to sign up.

Mandatory payrolling of benefits

From April 2026, for most benefits-in-kind (BiKs), the resulting Income Tax and Class 1A NICs will need to be reported to HMRC via PAYE through Real Time Information (RTI), in an attempt to ensure more accurate tax collection.

The key changes impacting employers, as a result of this legislative update, include:

• all BiKs, excluding employment related loans and accommodation, will be mandated to be reported via payroll from April 2026.
• employment related loans and accommodation can be voluntarily payrolled from April 2026. A P11D process will be available for those who do not wish to make use of the voluntary provision. Worth bearing in mind is that the Government does intend to mandate these benefits in due course.
• an end of year process will be introduced to amend the taxable values of any BiKs that cannot be determined in the tax year. 
• between April 2026 and April 2027, HMRC have committed to monitor the penalty position in view of the fact that there will inevitably be a ‘period of adjustment’. We expect that there may be a relaxation of penalties, to account for the transition period.

Employers that currently provide their employees with BiKs, but do not report through payroll, may want to discuss the benefits of transitioning before it becomes mandatory in April 2026 with their payroll provider.

HMRC are yet to confirm exactly how RTI reporting will change, so employers need to ensure they are aware of any updates as they happen. The tax and payroll teams at George Hay are monitoring developments closely to ensure we can advise our clients accordingly.

Student loan thresholds

The student loan repayment thresholds for the 2025-26 tax year have now been confirmed, as follows:

Outsourced payroll advice and management

Outsourcing your payroll is not just a strategic decision; it’s a transformative one. Reliable payroll outsourcing, that offers your business the seamless solutions it’s looking for, ensures compliance, minimises errors, and improves employee satisfaction.

Why wait? Start outsourcing your payroll now and reap the benefits of streamlined hassle-free payroll management.

Contact our team of payroll professionals to discuss your requirements, and how we can help, today.