Important Tax Changes for Employers of Household Staff in 2025
With the 2024/2025 tax year coming to an end, it’s essential for employers of nannies and domestic staff to be aware of key financial changes that will come into effect from April 2025. These adjustments will impact payroll expenses, National Insurance contributions, and statutory payments, so it’s important to prepare in advance. Here’s what you need to know:
Key Changes at a Glance:
- Employer’s National Insurance contributions will increase from 13.8% to 15%.
- The Secondary Threshold for National Insurance will decrease to £5,000 per year.
- National Minimum Wage will rise from £11.44 to £12.21 per hour.
- Personal Income Tax allowance remains frozen at £12,570.
- Statutory payments (maternity, paternity, sick pay) will see increases.
- Accommodation Offset Allowance will increase.
- Taxable benefits such as personal use of an employer’s car must be declared.
Employer’s National Insurance Contribution Changes
From 6th April 2025, employers will see an increase in National Insurance contributions from 13.8% to 15%, which will raise the cost of employing household staff. Additionally, the threshold at which employers must contribute to National Insurance (Secondary Threshold) will be reduced to £5,000 per year, meaning more earnings will now be subject to these deductions.
If you rely on payroll software or a salary calculator to manage staff wages, ensure that these updates are accounted for before the new tax year begins.
National Minimum Wage Adjustments
The National Minimum Wage is set to increase from £11.44 to £12.21 per hour. Employers will need to review staff wages to ensure they meet or exceed this new legal requirement. If your employee’s wage is below this threshold, their salary will need to be adjusted accordingly.
Personal Income Tax Allowance Remains Unchanged
The Personal Income Tax allowance for 2025/26 will remain fixed at £12,570. This means employees will only be taxed on earnings above this threshold, although individual tax codes may impact exact deductions. Employers should confirm that their payroll systems are set up correctly to reflect these figures.
Updates to Statutory Payments
Several statutory payments will see increases, including:
- Statutory Maternity Pay (SMP) and Statutory Adoption Pay (SAP): While the first six weeks remain unchanged, the statutory weekly rate for the remaining 33 weeks will rise to £187.18 or 90% of the employee’s average weekly earnings, whichever is lower.
- Statutory Paternity Pay (SPP), Shared Parental Pay (ShPP), and Parental Bereavement Pay (SPBP): These will all be set at £187.18 per week or 90% of average weekly earnings, whichever is lower.
- Statutory Sick Pay (SSP): Increasing from £116.75 to £118.75 per week.
Increased Accommodation Offset Allowance
For employers providing live-in accommodation, the Accommodation Offset Allowance will rise from £9.99 per day to £10.66, or from £69.93 to £74.62 per week. This adjustment affects cases where an employer includes housing as part of a staff member’s compensation package.
Benefits in Kind and Taxable Perks
Employers must ensure they report any taxable benefits provided to staff. For example, if a nanny or household employee uses the employer’s car for personal purposes, including commuting, this is considered a taxable benefit and must be declared to HMRC. Employers should review these arrangements to ensure compliance with reporting obligations.
Need Assistance?
Navigating tax changes can be complex, but we are here to help. If you have any questions about how these updates affect your employment arrangements, feel free to reach out for tailored guidance, you can read the full guidance here. Payroll service providers such as Nannytax, Stafftax, and other household payroll specialists can assist with ensuring compliance and managing payroll efficiently.
Be prepared for the new tax year by ensuring your payroll and contracts reflect these important updates!
