*In the recent Autumn 2024 Budget, Chancellor Rachel Reeves announced several significant shifts, with a focus on reshaping public spending and fiscal policy. We’ve already given you the Key Takeaways for the 2024 Autumn Budget and among these was a notable increase in Employers’ National Insurance (NI) contributions. The idea behind this policy is aimed at strengthening the economy’s public services funding. Here’s what these changes mean for your business, and some practical steps you can take to future-proof yourself and your business.
Employers’ National Insurance (NI) Increase
Starting from April 2025, Employers’ NI contributions will see substantial adjustments:
- Rate Increase: NI contributions for employers will rise from 13.8% to 15%, impacting business payroll expenses. (No change in rate for employees.)
- Threshold Reduction: The NI threshold for employer contributions drops from £9,100 to £5,000, meaning many businesses will pay NI on a larger portion of employee earnings.
Impact on Your Business
This change in contributions is expected to affect businesses of all sizes, but it may hit companies with a larger workforce hardest.
Here’s a closer look at the implications:
- Higher Costs per Employee
With the new lower threshold, each employee will incur an estimated additional NI cost of £615 annually*. For example, if your business has 100 employees, you may face an additional £60,000 annually*. This is a cost increase that could impact budgeting and growth plans. - SMEs and Employment Allowance
Small and medium sized enterprises that qualify for the Employment Allowance may find partial relief, as this allowance rises to £10,500 in 2025. However, businesses with higher payroll costs may not benefit as significantly, emphasising the need to strategically review staffing and budgeting.
Action Steps: Navigating the Changes
Businesses can take several proactive steps to manage these rising NI costs:
- Adjust Payroll Budgets
Update financial forecasts to account for the new NI increase. Ensure your business is prepared to handle the higher payroll expenses without sacrificing key investments. - Evaluate Workforce Efficiency
Assess productivity and explore efficiency improvements. Consider whether adjustments to workforce structure could help maintain productivity while keeping NI expenses manageable. - Seek Professional Advice
With the Employment Allowance increasing, consulting an accountant to leverage potential reliefs and explore tax efficient solutions will be essential. A skilled and knowledgeable advisor can help you navigate these changes and identify strategies to minimise the financial impact on your business.
The Bigger Picture
The 2024 budget represents the government’s first comprehensive fiscal plan since the Labour Party took office, marking a major shift in economic direction. In addition to NI changes, the budget sets ambitious targets for public spending and includes tax hikes in areas like Capital Gains Tax (CGT) and Inheritance Tax (IHT). While the aim is to fund public services more robustly, these changes place increased cost pressure on businesses, especially those operating within competitive and cost sensitive industries.
Your Business Needs You To Act Now
While the tax increase may raise concerns, understanding and preparing for these shifts is essential to minimise their impact. By updating payroll projections, exploring possible efficiencies, and seeking professional guidance, businesses can navigate these changes effectively. Here at Nuvo, we specialise in helping clients make informed, strategic decisions to optimise their tax planning in line with evolving regulations.
Want to discuss how our team can support your business in navigating these changes?
Drop us a line.
Want more about Employers’ National Insurance (NI) Increase?
Go straight to the source.
For more detailed analysis, you can explore the full budget announcements through these official resources:
- House of Lords Library Summary
- HM Treasury Official Budget Document (PDF)
- And if you’d prefer a 60 second video instead, here’s our Tax Partner explaining the Employers’ National Insurance Increase
*Estimates only
