The new tax year and your take-home pay
3 minutes to read
The new tax year starts on 6th April and as always it brings a few changes that may affect your take-home pay. Let’s take a look at what this might mean for you.
Income Tax
There is no change to the basic tax-free personal allowance . For many of you, this means no change to your tax code. For example, if yours is 1257L, S1257L or C1257L, it will remain unchanged.
The rates and thresholds for paying income tax also remain unchanged except for those of you who live in Scotland. Scotland operates a different system. Up here, there are six income tax bands, some of which shift slightly this year.
Employer’s National Insurance
Within the Budget announced on 30th October 2024, the Chancellor confirmed the rate of Employer’s National Insurance contributions (ERNIC) will be increasing effective 06th April 2025.
What is the increase?
Currently, ERNIC is charged at 13.8%. This will increase to 15% effective 06th April 2025.
Additionally, the Secondary Threshold at which point ERNIC becomes payable, is reducing as follows:
| Annual | Reducing from £9000 to £5000 |
|---|---|
| Monthly | Reducing from £758 to £417 |
| Weekly | Reducing from £175 to £96 |
How will this increase affect Umbrella company employees?
As an Umbrella company employee, you complete work for your end client and submit a timesheet upon completion of a defined period (usually weekly or monthly).
Your end client then pays your recruitment agency the agreed assignment rate and in turn, your recruitment agency pays the assignment rate to your Umbrella company.
The assignment rate includes your gross pay, holiday pay and the Umbrella company’s employment costs. This is why an Umbrella assignment rate is typically greater than a PAYE rate as it includes an “uplift” to account for the Umbrella company’s employment costs.
Please read our “How is my take-home pay calculated?” guide for more information.
Once the Umbrella company’s employment costs (and Umbrella company margin) are deducted from the assignment rate, the remaining funds are your gross pay and holiday pay.
If the current Umbrella assignment rate remains unchanged, you will see an increase to the ERNIC deduction and therefore your gross pay will be slightly reduced.
If you have any questions about how the upcoming increase to ERNIC may affect you, please email us at hello@key.co.com
The Apprenticeship Levy
There are no changes to the Apprenticeship Levy
Auto-Enrolment Pension Contributions
There are no changes to the Contribution Values and no changes to Pensionable Earnings.
Student and Postgraduate Loans
Student Loan repayments for those on Plan 1 will be calculated as a percentage of any earnings over £26,065 (up from £24,990 last year).
For those on Plan 2, repayments will be calculated on earnings over £28,470 (up from £27,294 last year).
Learn more: Which repayment plan am I on?
P60 for 2024/25
Your P60 for tax year 2024/25 will be hosted in your online account by the 31st of May 2025. We’ll email everyone that’s due a P60, once it’s available for download from within your online account.
If you’re reading this after 31st May 2025 and you haven’t received a P60, there might be a reason behind it.
