The new tax year is getting closer and will bring with it several changes affecting employers and employees. Despite the main income tax rates and allowances for employees remaining frozen, there are plenty of new rules and rates for employers to keep on top of. Here’s a whistle-stop tour through some of the key changes coming from 6 April 2025.
National Insurance Contributions
One of the most significant announcements at last year’s Autumn Budget was the decision to increase the National Insurance Contributions (NICs) rates payable by employers.
From 6 April 2025, the main rate of employers’ NICs will increase from 13.8% to 15%. The Class 1A rate will match the main rate increase, creating further costs for employers who provide benefits in kind (BIK) to their staff.
At the same time, the threshold from which employers have to pay NICs is set to reduce from the current £9,100 per year to £5,000, where it will remain until 5 April 2028. This will particularly impact employers with large numbers of part time staff, as NICs will become payable on wages which would previously have been below the employers NIC threshold.
Employment Allowance
For some employers, the higher NIC rates will be offset by an increase in the Employment Allowance.
From 6 April, employers entitled to claim the employment allowance will benefit from a credit against their employers’ NIC liability of up to £10,500 (up from £5,000 currently).
The Employment Allowance is currently only available where the employer’s Class 1 NIC bill in the previous tax year was less than £100,000, meaning it has only been relevant to smaller employers. That restriction will be removed from April 2025, allowing more employers to benefit from the uplifted allowance, and helping to soften the impact of the NIC rate and threshold changes outlined above.
National Minimum Wage rates
The National Minimum Wage (NMW) and National Living Wage (NLW) will both increase, as covered in last month’s Employer Focus.
From 1 April 2025, employers will have to ensure they comply with the increased rates, which will see the NLW (for workers aged 21 and over) increase from £11.44 to £12.21 per hour, and the NMW for 18-20 year olds increase from £8.60 to £10 per hour.
HMRC are presenting a series of webinars in March covering the NMW increases, to help employers get ready for the changes and avoid some common NMW errors. Employers can register for the webinars to attend them live, or to receive a recording to watch in their own time.
Company cars, vans and fuel
The ‘appropriate percentage’ used to calculate the BIK charge for company cars will increase by 1% for almost all cars from 6 April. Perhaps surprisingly, the most polluting vehicles will be unaffected – cars with CO2 emissions of 160g/km or more will see no change in their BIK value compared to the current tax year.
Looking further ahead, there will be significant increases in the BIK charge for hybrid cars coming from April 2028, as covered in a previous edition of Employer Focus.
Change is also coming for double cab pickups (DCPUs). Following several u-turns in policy, these vehicles will be treated as cars for BIK and capital allowances purposes from April 2025, potentially increasing tax costs for employees driving this type of vehicle, and Class 1A NIC liabilities for their employers. However, transitional measures will allow employers to continue to treat DCPUs purchased, leased or ordered before 6 April 2025 as vans until the earlier of, disposal, lease expiry, or 5 April 2029.
Finally, there will be the usual inflationary increases in van, and van fuel benefit rates, where employees have significant private use of company vans and fuel– up from £3,960 to £4,020 and from £757 to £769 respectively as of 6 April 2025. The multiplier used to calculate the BIK for private fuel provided to company car drivers will also increase based on inflation – up from £27,800 to £28,200 from 6 April 2025. Workplace charging for electric vehicles remains exempt.
Administrative change on the horizon
Looking further ahead, many employers will need to prepare for the requirement to payroll most benefits in kind from April 2026. Further details were published in a Policy Paper after last autumn’s Budget.
This article reflects the position at the date of publication shown above. If you are reading this at a later date you are advised to check that that position has not changed in the time since.
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