Autumn Budget 2024: The government is to increase the rate of employer national insurance contributions (NICs) by 1.2 percentage points to 15% from 6 April 2025.
This will mean employers will have to pay 15p in NIC for every £1 paid to an employee. In addition, the NIC per-employee secondary threshold at which employers start to pay NI will be reduced from £9,100 per year to £5,000 per year.
Chancellor of the Exchequer Rachel Reeves made the announcement in the Autumn Budget, stating that it was “taking the difficult decision to increase the rate to repair the public finances and help raise the revenue required to increase funding for public services”.
Mathew Akrigg, policy and research officer for the Chartered Institute of Payroll Professionals (CIPP), said: “Since Labour came into power, we’ve seen positive movements in the world of national living wage, parental rights, and statutory sick pay. These are fantastic for workers, however they come at a huge cost to employers. Today’s announcement is no different, increasing the overall cost of employment to employers throughout the UK. This may lead to suppressed wage growth and reduced employment opportunities.”
Hannah English, head of DC corporate at Hymans Robertson, added: “The increase in NICS for employers is likely to dramatically increase the costs for employers. While the perception that the recent reductions in DB [defined benefit] scheme funding costs have created more than enough breathing space for extra NICs for UK corporates on their wage bills, we are concerned the opposite is true. Stacking another cost on the pay and benefits for every UK corporate may drive behaviours that yet again can harm today’s working people in their DC [defined contribution] pension schemes.
“Corporates may choose to stop sharing employer NI savings on salary sacrificed pension contributions. For an employee on a £32,000 salary making 5% contributions into their pension via salary sacrifice, the employee may currently benefit form an additional £221 per year by way of the valuable sharing of all NI savings. Under the proposed changes, this would be worth £240. If employers decide to no longer share these savings, this could have a long-term impact on the outcomes of today’s savers. The change may be the final straw for those employers that have upheld their generous pension contributions despite difficult economic conditions.”
