On 30 October 2024, the UK Government set out the Autumn Budget with changes to the minimum wage, employer National Insurance Contributions, and the taxation of umbrella companies.
Overall it does not represent a significant change for employers, with the most significant change being the increase to employer National Insurance Contributions to 15%.
We break down the key points for employers below.
National Minimum Wage
From 1 April 2025:
- The National Living Wage (21 and older) will increase by 6.73% to £12.21;
- The National Minimum Wage for 18 to 20-year-olds will increase by 16.28% to £10.00;
- National Minimum Wages for those under 18 and apprentices will increase by 17.97% to £7.55; and
- The daily accommodation offset will increase by 6.71% to £10.66.
The new Labour Government has expressed an ambition to make the minimum wage a “genuine living wage” and to move towards a single minimum wage for all adult workers. It is expected that the 18-20 wage will move to align with the 21+ rate in the coming years.
Tax and National Insurance Contributions
From 6 April 2025 the following changes will come into effect in respect of employer National insurance Contributions (NICs):
- The rate of employer National Insurance Contributions will be increase from 13.8% to 15%;
- The threshold on employee earnings for employer NICs to become payable will decrease from £9,100 to £5,000, effective until 6 April 2028 after which point it will increase in line with the Consumer Price Index; and
- The Employment Allowance (which allows eligible employers to reduce their employer NICs bills by £5,000 if they had an employer NICs bill of £100,000 or less in the previous tax year) will be adjusted to (i) extend the Allowance to all employers with employer NICs bills by removing the £100,000 threshold and (ii) increase the Allowance to £10,500.
There are no changes to income tax or employee NICs. However, the Government has announced it will not extend the freeze on the thresholds for income tax, which will increase with inflation from 6 April 2028.
Tackling tax non-compliance in the umbrella company market
Alongside the Budget, the Government announced plans to legislate so that from April 2026 to make recruitment agencies responsible for accounting for PAYE on payments made to workers that are supplied via umbrella companies. Where there is no agency, this responsibility will fall to the end client business.
The measure is said to be motived by “significant levels of tax avoidance and fraud” in the umbrella company market, with workers left with unexpected large tax bills. No draft legislation has been published, but the Government has published a policy paper here.
Other changes
In addition, the Budget announced a number of other changes:
- The Budget confirms that the Government will move forward with plans to require employers to use payroll software to report and pay tax on benefits in kind, which will come into effect, in phases, from April 2026. This will apply to income tax and Class 1A National Insurance contributions (NICs).
- Employer NICs relief for employers hiring qualifying veterans is extended until 5 April 2026.
- The Government announced it will legislate to abolish the “non-dom” status for non-UK domiciled individuals from 5 April 2025, introducing a new scheme that will allow those who opt-in to the new scheme to not pay UK taxes on foreign income and gains for the first four years of their tax residence in the UK.
- The Government set out its intention to publish a “Get Britain Working” white paper to boost participation in the workforce with a £240 million investment. Whether this will involve measures that will directly impact on employers remains to be seen.
What next?
The Budget is not a seismic change for employers. However, the increase to employer NICs and the increases to the minimum wage rates (which is particularly large for younger workers and apprentices) may result in higher wage bills for many employers. The impact may be offset somewhat by the changes to the Employment Allowance. That trend is likely to continue given the Government’s stated desire over time harmonise the minimum wage to a single rate for all adult workers.
