Dark cloud illuminated from behind by bright sunlight
In search of silver linings: what Budget 2024 means for employers and employees

The Government’s revenue-raising plans announced at last month’s Budget focused to a significant extent on measures which will affect employers. Alongside these, there was some welcome news for those employing veterans, and for working parents affected by the High Income Child Benefit charge.

National Insurance bites twice – rate up, threshold down

The rate of National Insurance Contributions (NICs) payable by employers will increase from 13.8% to 15% from 6 April 2025. At the same time, the threshold from which employers have to pay NICs is set to reduce from the current £9,100 to £5,000 per year, where it will be fixed until 5 April 2028.

The Class 1A NIC rate which applies to the value of benefits in kind provided to employees will not be affected, remaining at 13.8% after April 2025. This may provide a small incentive for employers to reconsider their remuneration arrangements, if benefits in kind prove more efficient from a NIC perspective. However, care must be taken to consider the ‘Optional Remuneration Arrangement’ rules, and professional advice may be needed before changing employees’ pay and benefits packages.

Employment Allowance – relief available for more employers

Under existing rules, the employment allowance provides employers who had a total NIC liability in the previous tax year of less than £100,000 with a £5,000 deduction against their employers’ NIC bill.

From April 2025, the employment allowance will more than double to £10,500, and the £100,000 threshold will be abolished, meaning more employers will be able to benefit from the deduction, and some small employers will see their NIC bills reduced to zero.

As a result of these changes, the Government estimates that 865,000 employers will pay no NIC in 2025/26, and that more than half of employers who currently pay NICs will see this cost either stay the same or reduce next year compared to its current level.

However, larger employers will see their bills increase, and in some cases significantly. This is particularly true for employers with large numbers of part time staff. The reduction in the employers NIC threshold to £5,000 will result in NIC being payable on wages which would previously have been below the employers NIC threshold.

Veterans NIC relief extended

Employers taking on former members of the armed forces may benefit from NIC exemption on up to £50,270 of earnings paid to qualifying ex-service personnel during their first 12 months of civilian employment.

This relief was originally due to end in April 2024 but has been extended twice, most recently at October’s Budget, and will now be available until April 2026. Further eligibility details can be found in our previous Employer Focus article on veterans NIC relief.

National Living Wage up, and progress towards one minimum wage rate for all adults

May’s Employer Focus summarised The Low Pay Commission’s recommendations regarding the National Minimum Wage (NWM) and National Living Wage (NLW). The Government went on to ask the LPC to recommend a NLW level which reflects increases in the cost of living, and to consider a NMW rate for 18-20 year olds as a first step towards creating one minimum wage rate for all adults.

The LPC’s recommendations have been accepted, which will see the NLW (available to workers aged 21 and over) rise from £11.44 to £12.21 per hour from April 2025. From the same date, the NMW for 18-20 year olds will rise from £8.60 to £10 per hour. This has been announced as a first step towards parity for all minimum wage workers over the age of 18, so the NMW for this age group can be expected to rise again in future.

High Income Child Benefit Charge simplification

Working parents in a household where at least one earner’s income is over £60,000 and either parent claims Child Benefit currently have to file a Self-Assessment tax return in order to pay the High Income Child Benefit Charge (HICBC).

Plans were announced at October’s Budget to allow employees to pay any HICBC due via monthly deductions from their salary from April 2025, potentially removing the need for them to file tax returns. We are awaiting further details of how this new system will operate. 

For those who will still need to file tax returns for other reasons, the Government aims to enable HICBC data to be pre-populated, meaning it is less likely to be overlooked by those remaining in Self-Assessment.

Finally, the previous Government’s aims to reform HICBC by assessing liability based on combined household income have been shelved for cost reasons. Whilst this avoids some significant practical complications with the idea, it leaves the inherent unfairness that a household where one parent earns £80,000 and the other doesn’t work will repay via the HICBC all Child Benefit received each year, whilst a household where two parents each earn £60,000 can retain full Child Benefit.

 

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.   

We regularly publish articles on a range of tax and wider topical issues which affect employers. If you wish to subscribe to our monthly Employer Focus e-newsletter, please contact us.