Answers are provided in this TAXguide to questions asked in ICAEW's payroll and reward update webinar.
ICAEW’s Tax Faculty delivered a payroll and reward update webinar on 3 April 2025. The webinar was presented by Ian Holloway, payroll professional and member of ICAEW Tax Faculty Employment Taxes & NIC Committee, and Adelle Greenwood, Technical Manager – Employment Taxes and NIC, ICAEW. The webinar is available to watch on-demand. Answers to questions asked during the webinar are provided below. In some instances, the questions have been edited to aid understanding.
Employment allowance
- Does a two director/shareholder (husband and wife) limited company qualify for the employment allowance if only one director has a salary that incurs a secondary liability?
That would be regarded as a single-director company and, therefore, excluded. The rules require there to be at least one additional employee (as well as a company director in such cases) liable to national insurance contributions (NIC) above the secondary threshold in order to qualify for the employment allowance.
- Can the employment allowance be used for company directors as well as employees?
Yes, subject to the exclusion for single-director companies and as long as the employee/employees are earning above the secondary threshold and the employer pays NIC. The employment allowance itself can be used for all employer NIC liabilities, including those relating to the director.
- If we have two different entities but connected, can both entities be entitled to the employer's allowance?
No, if they are connected then this is a specific exclusion.
- Regarding connected 'entities', is a limited company and a trade partnership (not a limited liability partnership) connected if there are common directors?
Yes, these would be connected entities.
- I understand the community interest company I help as a non-executive director isn’t eligible to claim the employment allowance. Any comments please?
This may depend on the full operational details of the company: connection, public sector, etc. See HMRC guidance on eligibility for further information.
- Employer Allowance eligibility 2025/26 - what is the position with GP surgery payrolls?
See HMRC's guidance on eligibility including in relation to functions of a wholly or mainly public nature.
- If a shareholder has 100% shares in two companies in different locations, do both receive employment allowance?
The two companies will be connected because of this shareholding. Therefore, both cannot claim the employment allowance even though they operate from different locations.
Other NIC questions
- To obtain a qualifying year for state pension, is it sufficient to be paid £6,500 or does it need to be over £6,500 (eg, £6,501)?
Earnings at the lower earnings limit (LEL) are sufficient for the year to be qualifying for NIC purposes, they do not need to be in excess of the LEL. The year is considered qualifying if earnings are between the LEL (£6,500) and the primary threshold (£12,570) when NIC becomes payable. Therefore, having earnings at the LEL would be enough, even if no NIC is payable.
- Please repeat the date of birth for reduced NIC rates.
With regard to the lower NIC rates for women, the full payment summary (FPS) will reject if the date of birth is after 5 April 1961. Women on NI letters B, I and E must have a date of birth that is before this date
- Are there any recommendations for director salaries for 2025/26 in line with the new thresholds and allowances?
Whilst we are not able to make such recommendations, the new secondary threshold (ST) when employer NIC becomes due is £5,000 and this means that employer NIC will be due before the LEL is reached for the year to be qualifying.
Statutory payments
- Can neonatal pay be reclaimed and is it similar to maternity pay with small employers relief?
Yes, and the same process applies. HMRC guidance on recovering statutory payments as a small employer can be found here.
- Agreed regarding neonatal care. I only found 1 document explaining the 8 days!! (guidance was lacking).
The ACAS guidance Criteria for neonatal care leave does point this out - this guidance was not available at the time of the webinar
- When does 80% statutory sick pay (SSP) come in or is it still under consultation?
The 80% is now in the Employment Rights Bill as it was decided as a result of a consultation. The effective date of the SSP changes has not yet been decided.
- SSP - is the 80% worked out on the average gross pay?
The Employment Rights Bill refers to normal weekly earnings so the calculation will remain based on all earnings subject to class 1 NIC in the relevant period.
- The 1st of April is a legislative position, not payroll. Who can confirm that legislative date and payroll date do not breach any other related law or interpretation of law and is the employer safe, rather then getting potential a liability?
It is correct that the 2025/26 national minimum wage (NMW) must be paid to workers from the start of the first full pay reference period starting on or after 1 April 2025, but if an employer wants to pay from 1 April and this happens to be mid-way through a pay reference period, there is nothing to stop them doing that.
- With regard to the high income child benefit charge (HICBC), it won't necessarily be known who the higher taxpayer will be.
This is correct but the new option to have the charge collected via PAYE is not mandatory and it's only an option for the employee. If they don't know they have a liability until the end of the tax year, then they can carry on via self-assessment.
Making Tax Digital
- What if I have different software for quarterly returns to the tax return submission?
This is fine as long as between the two pieces of software can do the quarterly returns and the end of year one.
- We understood that you could use different software for the end of year filing to the bookkeeping software - is this correct still?
Yes
- MTD for turnover £30,000. Is that all barbers, brickies, etc?
If the barber / brickie is a sole trader, then yes, from April 2027. If they are employed, then the PAYE and / or construction industry scheme (CIS) requirements have not changed
Other topics
- What were the changes you mentioned to CIS?
The law says that operations in scope of CIS are those which “form an integral part of, or are preparatory to, or are for rendering complete such operations as are previously described”. So, the changes in HMRC's interpretation is with regard to activities regarding the planning (for construction), the site preparation (pre-construction), the construction itself and the finishing operations (post-construction). CIS 340 Appendix C details HMRC's interpretation of included and excluded activities.
- Removing the lower threshold from pensions mean that employees pay more into pension pot as compared to last tax year?
Removing or lowering the lower threshold will have the impact that both worker and employer will pay more into the pension if, indeed, the pension scheme is a band earnings one (where contributions are paid between the lower and upper qualifying bands).
- We have an employee being granted a number of performance shares, but not all are fully vested. In recording this through the payslip, presumably we just use the number of shares actually vested, not the full number? (I imagine certain conditions potentially weren't met?)
The general concept is that a tax liability arises at the point that vested shares are exercised. It is only at that point that a taxable value can be determined.
- Can the agent resolution service be used for McCloud remedy issues?
No, the agent resolution service is for self-assessment and PAYE issues only and is an escalation service for use once the usual routes have been exhausted. For McCloud enquiries please see: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/pension-scheme-enquiries.
- Once criteria is met for query resolution, do we simply send an email to the address supplied?
The resolution service is now accessible via HMRC’s Check when you can expect a reply from HMRC’ tool.. The criteria for use is set out in this article
Benefits in kind
- We plan to start payrolling benefits for 2025/2026. What happens if the cost of benefit changes during the tax year?
If there is a known annual value, then take this and divide it by the pay frequency to come to a value to put through the payroll. If the value is not known, you can use an estimate and adjust via the payroll when the value is known (on a go forward basis only). HMRC issued a technical note along with the announcement to delay payrolling of benefits in kind which addresses this issue.
- We currently have no benefits. Should I tick the box to say they will all be done via payslip for the coming tax year so that if we do have benefits, I can add it straight online, or if we don’t have any in the next tax year either, can I report nil?
Yes, it makes sense to do this (though it should have been done by 10pm on 05/04/25). If there are no benefits, then there is nothing to report.
- What about annual subscriptions - when do they get payrolled?
If there is a known annual value, then take this and divide it by the pay frequency to come to a value to put through the payroll. If it is a one-off annual subscription or the value is not known, you can use an estimate and adjust via the payroll when the value is known (on a go forward basis only). HMRC issued a technical note along with the announcement to delay payrolling of benefits in kind which addresses this issue.
- If someone gets £7 for a tube fare as expenses, does that have to go through payroll?
If it is receipted and is truly a business expense, there is no tax liability so does not have to go through the payroll, only taxable expenses will need to go through payroll along with benefits in kind.
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