Budget 2024: Key Updates on Employer National Insurance and Minimum Wage

Understanding the Budget’s Impact on Payroll

The Autumn Budget 2024 introduced several significant changes that will impact payroll costs and planning for employers. In this article, we’ll explore how the new measures affect employer National Insurance contributions, Employment Allowance, National Minimum Wage (NMW) rates, and the potential impact on your payroll and financial projections.

Upcoming Changes to Employer National Insurance Contributions

Following the Autumn Budget 2024, several significant changes are set to impact employer National Insurance contributions (NICs), effective from April 6, 2025, through April 5, 2028:

• Secondary Threshold Reduction
  The Class 1 National Insurance contributions secondary threshold will decrease from £9,100 to £5,000 annually. This change means more of employers’ payroll costs will be subject to NIC at the new threshold. After April 2028, this threshold will adjust with the Consumer Price Index (CPI).
• Rate Increase
  The main rate of secondary Class 1 NIC will rise from 13.8% to 15%. The same increase will apply to the Class 1A and Class 1B employer rates.

Doubling of Employment Allowance

The Employment Allowance will see a boost, rising from £5,000 to £10,500 as of April 2025. Additionally, the current restriction, limiting the allowance to employers with under £100,000 in NIC liabilities in the previous tax year, will be removed. With this increase, eligible employers can reduce their NIC liabilities by up to £10,500 per year.

Note: Details on the new criteria for eligible employers are yet to be confirmed by the government.

Impact on Employment Costs

In conjunction with these NIC changes, employers will also need to account for new National Minimum Wage (NMW) and National Living Wage (NLW) rates, effective from April 1, 2025:

The rise in both NIC rates and minimum wages presents a twofold increase in employment costs for businesses. However, the enhanced Employment Allowance provides some relief, particularly for smaller employers.

Planning Ahead: Reviewing Budgets and Projections

Given these upcoming changes, many employers are already reviewing or projecting how these adjustments will impact their future budgets. Proactive planning can help businesses understand the financial effects on payroll costs, cash flow, and overall employment expenses, allowing them to adjust as needed before the changes take effect in April 2025.

Salary Sacrifice Arrangements: A Cost-Saving Opportunity

With the rise in NIC rates, salary sacrifice arrangements for workplace pensions may become a more attractive option within employer remuneration packages. These arrangements can help mitigate costs while offering valuable benefits to employees. These changes will be introduced through primary legislation before April 6, 2025.

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Avril Craig

Director & Head of Payroll

I am the Director of the Payroll Department in Dundee, covering payroll and automatic enrolment processes for our payroll bureau clients, and payroll support for clients who handle their own payroll. I oversee the timely…

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Jagoda Penkala

Payroll Manager

As the Operations Payroll Manager at Henderson Loggie, my journey with the firm began in 2015 when I joined as a trainee. Over the years, I have dedicated myself to mastering the intricacies of payroll…

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Ricky Clark

Director

I have worked with Henderson Loggie Financial Planning since 2013. Throughout this time, I have provided my client’s services and solutions suitable to help them meet their needs. Ensuring that I build strong ongoing relationships…

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Richard McPhee

Manager

I joined Henderson Loggie in 2005 and have specialised in both personal and corporation tax. I am an ATT (Association of Taxation Technicians) qualified manager, and since 2017 I have managed corporate clients exclusively. I…

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