How the Autumn 2024 Budget Impacts Employment
Increased Employer National Insurance Rates
In the Autumn 2024 Budget, the Labour government introduced significant changes to National Insurance (NI) contributions, impacting how much businesses will pay for their employees. Currently, employers pay NI at 13.8% on a worker’s earnings above £9,100 a year. From April 2025, Chancellor Rachel Reeves has increased the NI rate to 15% on any worker earnings above £5,000.
Impact on SMEs
The higher employer NI rate and lower threshold will increase costs for many SMEs in the coming year. This may lead to employers restricting wage increases, staffing levels or even cutting back on certain employee benefits to help manage the financial burden.
To help offset the impact of higher costs on SMEs, the government has increased the Employment Allowance from £5,000 to £10,500. This means that around 865,000 businesses will not pay NI at all next year, with another 1 million paying the same or less as they did previously. The Chancellor stated that businesses should be able to employ at least four full-time workers on the National Living Wage (NLW) without paying any National Insurance.
National Minimum Wage Increases
The Autumn 2024 Budget has also introduced key changes to the national minimum wage (NMW). Here’s what you need to know:
- For workers aged 21 and over, the national minimum wage will increase by 6.7%, from £11.44 to £12.21 per hour, effective from April 2025.
- For workers aged 18 to 20, the minimum hourly rate will rise by 16.3%, from £8.60 to £10, starting April 2025. This is part of a broader plan to eventually unify the wage rates for all adults.
Changes to Company Car Taxation (CCT)
The Autumn 2024 Budget introduced several changes to CCT, effective from 6 April 2028. These changes will impact businesses providing company cars and employees using them for private purposes.
Increased CCT Rates
o For zero-emission vehicles, the percentage for calculating CCT will increase by 2 percentage points per year, reaching 7% in 2028/29 and 9% in 2029/30.
o Vehicles with CO2 emissions of 1-50g/km will see their rates rise to 18% in 2028/29 and 19% in 2029/30.
o All other vehicles will have their rates increased by 1 percentage point per year, with the maximum rate reaching 39% by 2029/30.
o DCPUs (double cab pickup vehicles) with a payload of 1 tonne or more will be treated as company cars for income tax purposes, effective from 6 April 2025
How we can help
As always, it’s important to review how these changes will impact you or your business and make adjustments where needed. If you are an employer or employee affected by the above issues and want advice or support in connection with the same, or any employment law or HR issues more generally, please do not hesitate to get in contact with us on 01206 239761.
