Any employers hoping for some relief from increasing employment costs in today’s budget (October 30, 2024) will be sorely disappointed. Whilst there are some helpful measures, these are substantially outweighed by a rise in employer NIC.
In summary, the key measures:
- Employer NIC will rise by 1.2% to 15% from 6 April 2025.
- Employer NIC reduced from £9,100 to £5,000
- The Employment Allowance will rise from £5,000 to £10,500 for employers who had an employer NIC bill of less than £100,000 in the previous tax year.
- The National Minimum Wage will rise to £12.21 per hour (and £10 per hour for 18-20 year olds) from 6 April 2025.
- Freeze in tax and NIC thresholds will not be extended beyond 5 April 2028.
Employers targeted: A tough decision?
Despite a commitment to taking tough decisions, loading yet more costs onto already hard-pressed employers will seem to many employers to be no more than political expediency.
No one will see a fall in their net pay from the budget and the lowest paid will see increases via the increase to the National Minimum Wage. Most will agree this is no bad thing. In addition, the increase in employer NIC will no doubt raise substantial and necessary revenue for the government.
However, these are the immediate implications. In the longer-term, there is ample research and anecdotal evidence that employees will ultimately bear the brunt of this rise as employers seek to cut costs.
The hidden cost
The substantial employer cost increase will be seen by many as a huge gamble when it comes to the UK’s economic growth and prosperity. The risks are not hard to see. Coming on top of a lengthy period of increasing employer costs on multiple fronts, including substantially increased rates of corporate tax, the chancellor’s move may well be viewed as anti-employment and anti-growth.
Whilst the Chancellor has undertaken to protect smaller employers against the NIC rise with an increased Employment Allowance, many employers, particularly those in low margin sectors such as retail and social care or those employers who are already struggling to stay afloat, are likely to be very concerned.
The Chancellor’s commitment not to extend the freeze in NIC (and tax) thresholds beyond 5 April 2028 will be of little consolation. We are looking to employers to drive economic growth, and, with one stroke, the Chancellor has arguably made this much harder.
International Perspective
The government is also creating yet another barrier to inward investment, particularly for non-UK businesses that may be thinking of expanding into the UK. On top of abolishing the non-domicile regime (which, despite its drawbacks, helped attract business owners and investors to come and set-up business in the UK), many will argue that increasing employer costs can only but act as a further barrier to inward investment.
So, overall, not a good budget for employers unfortunately and tougher times ahead when it comes to employment cost.
Author: Lee McIntyre-Hamilton
Lee has over 23 years of experience in international mobility, expatriate tax and employment tax. He works with a diverse range of international organisations, from small owner-managed businesses to large multi-national corporations and non-profit organisations. Lee delivers coordinated, joined-up global mobility tax, international social security and payroll advice across many territories globally. He is a published writer on international tax matters, notably the Tiley & Collinson UK Tax Guide.
Contact Lee: lee@globalpayrollassociation.com
Any employers hoping for some relief from increasing employment costs in today’s budget (October 30, 2024) will be sorely disappointed. Whilst there are some helpful measures, these are substantially outweighed by a rise in employer NIC.
In summary, the key measures:
- Employer NIC will rise by 1.2% to 15% from 6 April 2025.
- Employer NIC reduced from £9,100 to £5,000
- The Employment Allowance will rise from £5,000 to £10,500 for employers who had an employer NIC bill of less than £100,000 in the previous tax year.
- The National Minimum Wage will rise to £12.21 per hour (and £10 per hour for 18-20 year olds) from 6 April 2025.
- Freeze in tax and NIC thresholds will not be extended beyond 5 April 2028.
Employers targeted: A tough decision?
Despite a commitment to taking tough decisions, loading yet more costs onto already hard-pressed employers will seem to many employers to be no more than political expediency.
No one will see a fall in their net pay from the budget and the lowest paid will see increases via the increase to the National Minimum Wage. Most will agree this is no bad thing. In addition, the increase in employer NIC will no doubt raise substantial and necessary revenue for the government.
However, these are the immediate implications. In the longer-term, there is ample research and anecdotal evidence that employees will ultimately bear the brunt of this rise as employers seek to cut costs.
The hidden cost
The substantial employer cost increase will be seen by many as a huge gamble when it comes to the UK’s economic growth and prosperity. The risks are not hard to see. Coming on top of a lengthy period of increasing employer costs on multiple fronts, including substantially increased rates of corporate tax, the chancellor’s move may well be viewed as anti-employment and anti-growth.
Whilst the Chancellor has undertaken to protect smaller employers against the NIC rise with an increased Employment Allowance, many employers, particularly those in low margin sectors such as retail and social care or those employers who are already struggling to stay afloat, are likely to be very concerned.
The Chancellor’s commitment not to extend the freeze in NIC (and tax) thresholds beyond 5 April 2028 will be of little consolation. We are looking to employers to drive economic growth, and, with one stroke, the Chancellor has arguably made this much harder.
International Perspective
The government is also creating yet another barrier to inward investment, particularly for non-UK businesses that may be thinking of expanding into the UK. On top of abolishing the non-domicile regime (which, despite its drawbacks, helped attract business owners and investors to come and set-up business in the UK), many will argue that increasing employer costs can only but act as a further barrier to inward investment.
So, overall, not a good budget for employers unfortunately and tougher times ahead when it comes to employment cost.
Author: Lee McIntyre-Hamilton
Lee has over 23 years of experience in international mobility, expatriate tax and employment tax. He works with a diverse range of international organisations, from small owner-managed businesses to large multi-national corporations and non-profit organisations. Lee delivers coordinated, joined-up global mobility tax, international social security and payroll advice across many territories globally. He is a published writer on international tax matters, notably the Tiley & Collinson UK Tax Guide.
Contact Lee: lee@globalpayrollassociation.com