Everything Changing in the 2025-26 Tax Year — From Employer NI to the New Living Wage
The 2025-26 tax year starts on 6 April 2025, and it brings a set of significant changes that will affect both employees and employers. While your own payslip tax deductions look broadly similar — employee NI stays at 8%, income tax rates and bands remain frozen — the environment around you is changing in ways that will affect wages, job markets, and the cost of living.
Employer NI: 15% from £5,000 threshold
The most consequential change for employment is the employer National Insurance reform announced in the October 2024 Autumn Budget. From 6 April 2025:
- Employer NI rate: 13.8% → 15%
- Secondary threshold: £9,100 → £5,000
- Employment Allowance: £5,000 → £10,500
For businesses outside the Employment Allowance bracket, this represents a material increase in the cost of each employee. The OBR projects it will raise £25 billion per year and will constrain wage growth in 2025-26.
National Living Wage: £12.21 from 1 April 2025
The National Living Wage rises to £12.21 per hour from 1 April 2025 (note: the NLW change date is 1 April, one week before the tax year changes on 6 April). That is a 6.7% increase from £11.44 in 2024-25. For a full-time 37.5-hour-week worker, annual gross earnings rise to approximately £23,810. The 18-20 rate rises from £8.60 to £10.00 — a 16.3% increase. See exactly how £12.21 an hour looks after tax.
State Pension: £230.25 per week
The new State Pension rises to £230.25 per week from April 2025, up from £221.20 — a 4.1% increase under the triple lock (earnings growth was the binding measure). That is £11,973 per year. As a point of comparison, the personal income tax allowance is £12,570 — the gap is narrowing. State pension take-home calculator.
Income tax thresholds: still frozen
The personal allowance remains at £12,570 and the higher rate threshold at £50,270. These are unchanged since April 2021 and will remain frozen until 2028-29 at the earliest. Anyone who received a pay rise in 2024-25 will find a higher proportion of their income is taxable in 2025-26, even though the rates themselves have not changed.
ISA allowance: £20,000 unchanged
The annual ISA allowance remains at £20,000 for 2025-26. The Lifetime ISA bonus (25% up to £1,000/year for under-40s saving toward a first home or retirement) and the Help to Buy ISA bonus also continue unchanged.
Pension annual allowance: £60,000 unchanged
The annual pension allowance — the maximum you can contribute to pensions with tax relief — stays at £60,000 for 2025-26. The money purchase annual allowance (for those who have accessed flexible pension income) remains at £10,000.
Conclusion
The 2025-26 tax year is defined less by what changes for employees on their payslips and more by the indirect effects of employer NI rises on job creation and wage growth. For anyone planning their finances for the year ahead, our take-home pay calculator is updated for all 2025-26 rates, including the new NLW and State Pension figures.