This bulletin follows the release of the April Agent Update (Issue 130). In this issue we cover the content most relevant to employment taxes and reward activities.

Changes to PAYE operation for mobile employees

• From 6 April 2025, previous rules for non-domiciled status ended and were replaced by a system based on tax residence. 
• The old process whereby employers would apply for a direction under section 690 ITEPA 2003 to operate PAYE on a reduced amount of globally mobile employees’ earnings has ceased. Any HMRC directions that were issued before 6 April 2025 will have ceased to have effect. This means that if employers wish to operate PAYE on a reduced amount of an eligible employee’s income for 2025/26, they will need to submit a new notification. 
• The new process allows employers and their agents to send HMRC a notification specifying a proportion of income paid to a globally mobile or treaty non-resident employee which will be treated as not being PAYE income. Read further information on the guidance. 
• Employers or their agents will need to check that the employee is eligible under the new rules and notify HMRC using a new online notification form. Employers can then operate PAYE on the reduced amount of income as soon as HMRC acknowledge receipt of the notification (this should be immediate). 
• If an employer pays employment income, which relates to an earlier tax year, to an employee on or after 6 April 2025, the payment is to be treated as PAYE income on the basis of the best estimate that can be reasonably made as to that amount where any of the following apply:
  • the employee was a non-UK tax resident;
  • the employee was a UK resident, but qualified for Overseas Workday Relief (OWR) and had elected to be taxed on the remittance basis; or
  • the year was a split year in relation to that employee.

Changes to OWR

• Employees will continue to be able to claim relief on their foreign employment income earned during tax years in which they are eligible for OWR. 
• The main changes that employees and employers need to be aware of are:
  • any foreign employment income does not need to be paid into a designated bank account overseas for employees to benefit from OWR, unless it relates to a tax year ending prior to 6 April 2025;
  • OWR will now be available for the first 4 years of UK residence and subject to an annual financial limit of £300,000 for each qualifying year (subject to certain grandfathering rules that can apply where an individual was UK resident prior to 6 April 2025); and
  • eligibility criteria for OWR have changed, so employers will need to consider whether their employees meet the revised eligibility criteria for the tax year. 
• Employees claiming OWR must continue to keep the necessary records of their work overseas to correctly complete their self-assessment tax returns at the end of the tax year. 
• Further guidance about the new OWR regime is available.

Student loan thresholds, rates and off-payroll workers

• The new student loan plan and postgraduate loan thresholds and rates from 6 April 2025 are as follows:
  • plan 1: £26,065;
  • plan 2: £28,470;
  • plan 4: £32,745; and
  • postgraduate loan: £21,000.
• Deductions for plans 1, 2 and 4 remain at 9% above the respective thresholds, with the rate for postgraduate loans above the respective threshold being 6%. 
• Employers of individuals working under the off-payroll working (OPW) rules must not deduct student or postgraduate loan repayments from the payments that go through payroll for off-payroll workers. 
• Where the off-payroll worker rules apply, the individual is classed as a deemed employee and payments to deemed employees are identified on payrolls by selecting the off-payroll worker marker (Real Time Information data item 208). 
• Deemed employees are responsible for making student or postgraduate loan repayments through their own self-assessment tax returns after the end of the tax year. 
• Additional information on operating PAYE within the OPW rules is also available.

Overdue PAYE Settlement Agreement (PSA) calculations

• HMRC recommend employers send their PSA calculations by 31 July following the end of the relevant tax year. HMRC’s preferred method of receiving calculations is with a PSA1 form.
• Where a PSA has been agreed with HMRC, employers must send in a calculation, even if it is to show no tax and national insurance contributions (NICs) are due for the year. 
• Employers should pay the total amount due under a PSA by 22 October (if paying electronically) following the end of the relevant tax year. 
• HMRC are raising determinations for employers who have failed to meet their PSA obligations for the tax year ending 5 April 2024.

Small employers’ relief compensation

• The compensation rate increased from 3% to 8.5% on 6 April 2025, as a result of aligning it with changes to employer NICs. 
• Employers who qualify for small employers’ relief, i.e. they have paid £45,000 or less in class 1 NICs, can therefore now reclaim 100% of all statutory payments (e.g., maternity/paternity/adoption pay), except for the statutory sick pay which cannot be reclaimed, plus an additional 8.5% compensation. This means small employers can now reclaim 108.5% from HMRC. 
• All other employers paying class 1 NICs can reclaim 92% of what they pay in these statutory payments with the exception of statutory neonatal care pay. 

New rates of National Minimum Wage (NMW)

• NMW rates increase on 1 April each year. This means employers need to use the new rates from the first pay reference period starting after 1 April 2025.
• Many employers find themselves underpaying workers because the calculation of NMW has gone wrong. Common issues range from making deductions, to not paying for all working time.
• HMRC have a recorded webinar that explains about common issues in more detail and how to avoid making mistakes.

Self-assessment repayments no longer available through telephone or webchat

• On 27 March 2025, HMRC paused the issuing of self-assessment repayments for new claims over the telephone (including the agent dedicated line) and through webchat until further notice. 
• Agents can continue to claim client refunds online through their agent account. Agents who are unable to access their online account are advised to contact HMRC’s online services helpdesk on 0300 200 3600. 
• If individuals contact HMRC directly, they will be advised to claim refunds through their online tax accounts or through their agent.