National Payroll Week 2025 – 39 things you didn’t know about payroll, tax and pensions

National Payroll Week is all about celebrating the important job that payroll professionals do to help keep the economic wheels turning. Collecting taxes and NI is a huge task and the PAYE system means employer and employee taxes are managed efficiently. At Adams Accountancy, we provide payroll/PAYE services to our clients to make hiring and managing employees as simple and efficient as possible.

When was the first payroll done?

• The earliest recorded payroll dates to around 7000 BC.
• In the 5th century, ancient Greeks kept payroll records by chiselling information into stone.

When was income tax introduced?

• The first income tax in Britain was introduced in 1799 by William Pitt the Younger to help fund the Napoleonic Wars.
• Income tax was levied on incomes over £60 per year at a rate of 2 old pence in the pound (approximately 0.83%).
• Income tax was originally intended to be a temporary measure but has remained in place ever since, except for a brief period between 1816-1842.

When was National Insurance introduced?

• National Insurance was first introduced in the UK in 1911 by the National Insurance Act 1911.
• The highest ever rate of National Insurance contributions in the UK was 99.25%, implemented during World War II.

How much legislation affects payroll in the UK?

• There are at least 174 pieces of regulation affecting payroll in the UK.

When was the PAYE system created?

• The Pay As You Earn (PAYE) system was introduced in the UK in 1944.

When was the first state pension introduced in the UK?

• The Old Age Pension Act of 1908 paved the way for the introduction of the state pension in 1909.
• The maximum pension was 25p a week.
• The first pension has a ‘character’ clause which stated that individuals had to be ‘of good character’ to receive the payment.
• The first contributory state pension scheme was introduced in 1925.
• It’s estimated that £19.4 billion has been lost across 1.6 million pension pots in the UK.

What strange taxes have been collected in the past?

• Scutage Tax (circa 1100-1154) – Also known as the “cowardice tax”, it allowed knights to avoid military duty by paying a fee.
• Hearth Tax (1662-1689) -A tax of two shillings for each fireplace or stove.
• Window Tax (1696-1851) – This tax was based on the number of windows in a house, leading to many windows being bricked up to avoid the tax. It’s the origin of the phrase ‘daylight robbery’.
• Playing Cards and Dice Tax (1710-1960) – A tax on playing cards and dice that led to widespread forgeries to avoid paying it.
• Wallpaper Tax (1712-1836) – A tax on painted, printed or patterned wallpaper. People avoided it by buying plain paper and decorating it themselves.
• Hat Tax (1784-1811) – A tax on men’s hats, intended to tax the wealthy who were assumed to buy more hats. It led a reduction in hat wearing.
• A Brick Tax (1784-1850) A tax based on the number of bricks used affecting construction workers’ pay.

Other random facts about payroll, tax and pensions

• The UK tax year runs from April 6 to April 5 the following year, dating back to the switch from the Julian to Gregorian calendar in 1752.
• Only about one third of the UK’s 69.1 million population pay income tax.
• The top 1% of earners pay approximately 30% of all income tax collected.
• The UK tax code is one of the longest in the world at over 17,000 pages and around 10 million words.
• The personal allowance (tax-free amount) was introduced in 1979 and was frozen at £12,570 in March 2021 with no plan to increase it until after April 2028.
• The additional rate of tax (45%) was introduced in 2010, initially set at 50%.
• The UK has over 1,000 tax reliefs and allowances.
• The UK has double taxation agreements with over 130 countries to prevent individuals and businesses from being taxed twice on the same income.
• Fiscal drag is the term used to describe a higher tax take resulting from the freezing of tax-free allowances.

What’s changed in payroll for 2025?

• Employer National Insurance contributions increased from 13.8% to 15% in April 2025
• The secondary threshold for employer NI reduced from £9,100 to £5,000 annually
• Employment Allowance increased from £5,000 to £10,500 and the £100,000 cap was removed
• Class 1A National Insurance rate increased to 15% for expenses and benefits
• These changes mean many more small businesses now need to register for PAYE

Technology and AI trends

• AI in payroll is exploding: In 2025, 21% of businesses plan to integrate AI into their payroll systems, up from previous years [1]
• Fraud detection: AI systems can now detect payroll fraud by spotting unusual patterns like ghost employees or duplicate payments in real-time
• Predictive analytics: Modern payroll systems can forecast future salary costs and identify workforce trends to help with budget planning
• Self-service revolution: Employee self-service portals are becoming standard, allowing staff to update their own details and access payslips instantly

Looking ahead to 2026 and beyond, payroll professionals can expect even more automation, with ‘agentic AI’ systems that can make direct changes to payroll without human intervention. The integration of blockchain technology for secure transactions and predictive analytics for workforce planning will continue to transform how we think about paying people.

Does your accountant support you to run your payroll efficiently?

Are you keeping up with all the payroll changes in 2025? From the National Insurance increases to new technology opportunities, there’s a lot to get to grips with. Our experienced team stays on top of every change so you don’t have to. Whether you’re struggling with the new NI thresholds or wondering if AI could streamline your payroll, we’re here to help make payroll simple.

Check out our recommendations and see what our clients say about us. Call us on 01322 250001 for a free chat about how we can ensure your staff are always happy on pay day.

[1] https://www.gartner.com/en/newsroom/press-releases/2024-09-11-gartner-survey-shows-58-percent-of-finance-functions-use-ai-in-2024

About the author

Adams Accountancy is a team of 10 experienced chartered accountants based in Dartford, Kent, who specialise in taking the stress out of payroll and tax for small and medium-sized businesses across the UK, staying on top of every legislative change so you don’t have to. Contact us on 01322 250001 for a free chat about how we can make your payroll run smoothly.

Frequently asked questions about payroll

How do the 2025 National Insurance changes affect my small business?

From April 2025, employer National Insurance contributions increased from 13.8% to 15%, and you now start paying from £5,000 of employee earnings instead of £9,100. However, the Employment Allowance also increased to £10,500 (with no upper limit), which means many small businesses will actually benefit overall.

Do I need to register for PAYE if I only pay someone £5,500 a year?

Yes, under the 2025 changes, you now need to register for PAYE and operate payroll if you pay any employee £5,000 or more annually. You’ll need payroll software and must report to HMRC through RTI submissions every time you pay the employee.

How is artificial intelligence changing payroll, and should I be worried about it?

AI in payroll primarily automates calculations, spots errors, and keeps up with changing tax rules rather than replacing human expertise. For small businesses, this usually means fewer mistakes, less administration time, and better compliance.

What’s the difference between the old and new Employment Allowance rules?

The Employment Allowance increased from £5,000 to £10,500 per year, and the previous £100,000 cap was completely removed. This means virtually all eligible businesses can now claim the full allowance, regardless of size.

Can employees access their pay early, and what are the implications?

Some modern payroll systems now offer “pay on demand” features, allowing employees to access earned wages before payday. While this can improve employee satisfaction, it creates additional administrative complexity and potential costs that need careful consideration.

How often should I run payroll, and what are the reporting requirements?

You can run payroll at any regular interval that suits your business, but you must submit an FPS to HMRC every time you pay employees. Most small businesses find monthly payroll works well for both cash flow and administrative efficiency.

What records do I need to keep for payroll, and for how long?

You must keep all payroll records for at least three years after the end of the tax year they relate to, including employee details, pay rates, deductions, and RTI submissions. Digital payroll systems handle most record-keeping automatically, but ensure you have regular backups and can access historical data when needed.