The new chancellor has delivered her budget statement, which has a number of cost implications for businesses from April.
National Living Wage
The main adult rate of National Living Wage will rise in April from £11.44 to £12.21 per hour. The hourly rate for 18-20 year olds will rise from £8.60 to £10.00.
Employer National Insurance
From April 2025, employers will see the NIC rate rise from 13.8% to 15%, meaning an extra 1.2% on applicable earnings.
At the same time, the threshold at which the employer National Insurance rate kicks in will be lowered to when an employee earns £5,000 rather than the current £9,100. This means an additional £4,100 of earnings will now be subject to the new rate, costing business an extra £615 a year per employee whose earnings exceed the current threshold.
These significant increases will add £700 to the National Insurance costs of a full time employee on the National Living Wage, and over £800 to the cost of an employee on an average wage of £29,800.
Employment Allowance
Currently, businesses with an NIC bill of £100,000 or less in the previous tax year can benefit from the Employment Allowance, which allows them to take £5,000 off their employer NIC bill. This allowance will increase in April to £10,500 and the £100,000 limit will be removed meaning it will be available to all employers.
Whilst this increase in allowance will shield very small employers from the effects of the significant increases in employment costs (a small firm can employ four people on National Living Wage without paying any employer NICs at all) larger employers will feel the pinch, as the higher allowance may not significantly offset the extra cost to them.
Company Directors
Single directors of limited companies who don’t have any other employees will not benefit from the increase in the Employment Allowance. Therefore those paying themselves through payroll, above the new threshold of £5,000, will face a rise in their employer NICs.
