Changes to an Employers’ National Insurance Contributions (NICs)
It probably comes as no great surprise (with all the pre-budget rumours) that an employer’s NIC will be increasing form April 2025.
Currently the rate of an employer’s class 1, class 1A and class 1B NIC is 13.8%. This rate will be increasing to 15% from 6 April 2025.
In addition the secondary threshold at which an employer’s NIC is payable will be reduced from £9,100 to £5,000, again effective from 6 April 2025.
This means that for a Class 1A employee being paid £30,000 a year, the employer’s annual national insurance bill will increase from £2,884.80 to £3,749.40. This represents an increased cost to the business of £864.60 per annum.
Many business owners are understandably concerned about the impact of such an increase in this high-cost environment, which is why we’re inviting you to speak to us about the potential benefits of salary sacrifice/salary exchange, which have the benefit of reducing business costs in this area.
For example, if this same employee earning £30,000 a year started salary sacrificing their 5% employee pension contribution, the business would experience an employer’s NIC saving of £225 a year. You can read our Company Z Case Study, here, which provides a more detailed monetary example of the savings that you could experience.
Changes to the Employment Allowance
The Employment Allowance is a government initiative that allows eligible employers to reduce their National Insurance liability, currently by £5,000 for the 2024/25 tax year but following the budget announcement this will be increasing to £10,500 from 6 April 2025.
This allowance is designed to help smaller businesses with employment costs, allowing them to claim and pay less employers Class 1 National Insurance until their full allowance is spent or the tax year ends (whichever comes first).
The allowance is per business, not per employee, and can only be claimed against one payroll if your business has multiple.
One of the current eligibility criteria for the allowance is that an employer has to have Class 1 NI liabilities less than £100,000 in the previous tax year, however the government have confirmed that this threshold will be removed from 6 April 2025.
National Living Wage and National Minimum Wage increases
It was announced that both the National Living Wage and the National Minimum Wage (for 18-20 year olds) would increase from 6 April 2025, rising to £12.21 per hour and £10.00 per hour respectively.
For a 21 year old employee working 37.5 hours a week this is an increase of £1,505.54 a year.
If you operate a payroll that is going to be affected by this change, be sure to pass this information on to relevant colleagues. Did you know that The Harding Hub also provides payroll services? If you’d like to de-burden your organisation in this area, don’t hesitate to reach out and talk to us.
Corporation tax rates
The main rate of corporation tax will remain at 25% and the small profits rate will stay at 19%. To be eligible for the small profits rate a company must have profits of under £50,000 a year.
Business rates
Eligible retail, hospitality and leisure properties in England will receive 40% relief on their business rates liability for 2025/26 up to a cash cap for a business of £110,000.
Private schools in England will no longer be eligible for charitable rate relief from April 2025.
In Conclusion
2024’s budget fills a large portion of the “blackhole” in public finances from UK employers. When put together with Employment Rights Bill that is currently working its way through government, the years ahead look to be full of big changes for UK organisations.
The value of professional advice in this area has never been greater. The Harding Hub provides services to commercial, charitable and educational organisations and their people.
Why not get in touch and book in for a free consultation? By considering areas of Finance, HR, Technology, Payroll, Pensions, Workplace Wellbeing and Employee Benefits, we’ll identify potential areas for savings and efficiencies across your business.
Did you know?
Our team members work in partnership with our clients to turn their organisations into environments in which their people are happy, healthy and financially secure. Our service benefit extends to your individual employees, and if you would like to understand how the recent budget announcements may affect them personally, please read the analysis our parent company, Harding Financial, here.