The 2024 Autumn Budget brought challenging news for employers, announcing a sharp increase in employer National Insurance contributions (NICs) from April 2025, coupled with substantial inflation-driven rises in the National Living and Minimum Wage.
Elite Payroll Services can help you understand how the Autumn Budget will impact your payroll systems. Book a free consultation by getting in touch with our team today!
Employer NICs
From 6 April 2025, the rate of employer NICs will increase from 13.8% to 15%, and the starting annual threshold will be lower at £5,000 (it is currently £9,100). For example, for someone employed on £50,000 per annum, the employer NIC cost will be just over £1,100 higher for 2025/26:
- The increased 15% rate will also hit employers if they provide taxable benefits, such as medical cover, to employees.
- The £5,000 threshold will stay in place until 5 April 2028. The threshold reduction will have a disproportionate impact on employers with a large number of low earners.
On the plus side – especially for smaller employers – the employment allowance is being increased from £5,000 to £10,500. Currently, this allowance is not available where employer NICs were £100,000 or more in the previous tax year. This restriction will be removed.
National Minimum/Living Wage
Minimum wage rates will see substantial increases from 1 April 2025, with younger workers and apprentices benefiting the most:
- For those aged over 21 and over, the hourly rate will go up by 6.7% to £12.21.
- For 18- to 20-year-olds, there is a 16.3% increase to £10.00.
- For apprentices and those under 18, the increase to £7.55 represents an 18% hike.
This follows similarly high increases in April 2024. Employees will welcome the uplift, but many employers will struggle with the additional cost, especially those in the hospitality sector. For full-time employees aged 21 and over, the increase is worth £1,400 a year. For 18- to 20-year-olds, the annual benefit is potentially worth over £2,500.
The rates of National Minimum/Living Wage can be found here.
Elite Payroll can help you calculate how these changes will affect your payroll. For more information, contact us on 01423 727 334 or email [email protected]