The UK Government has unveiled its latest Budget, outlining a number of significant payroll changes that are likely to have a significant impact on businesses and individuals across the UK.
Here are some of the key changes announced in the Budget:
1. National Insurance
- Employer National Insurance Contributions (NICs) to increase by 1.2% from April 2025. The Employer NICs at present are 13.8% planned to increase to 15%
- The National Insurance Secondary threshold will be reduced from £9,100 to £5,000. This means Employer's National Insurance contribution will be due on income above £5,000
Consideration: Directors whose salaries are paid at the Secondary NI threshold must be reviewed and carefully planned.
Employment costs will be increasing for the majority of businesses due to the NICs rate increase and the decrease of the Secondary threshold. However, this is balanced for small employers with an increase in the Employment Allowance.
2. Employment Allowance
- Employment Allowance increasing from £5,000 to £10,500 from April 2025
- In addition, from April 2025 the £100,000 threshold for claiming the allowance will be removed, whilst all other eligibility criteria will remain)
3. Income Tax
- Income Tax threshold and Employee National Insurance thresholds will remain freeze until 2028/29, remaining £12,570 per tax year.
- The freeze will not be extended any further, meaning from 2028/29 the threshold will be reviewed annually in line with inflation.
4. National Minimum Wage
- The Low Pay Commission recommendation was fully accepted, confirming the National Minimum wage from April 2025 will be £12.21
- The age band rates will be phased in over time aiming to equalise pay for staff below the age of 21. An increase of 16.3% and 18% for staff below the age of 21, compared to 6.3% of the NLW, is certainly contributing to the plan.
| |
National Minimum Wage rate |
Increase (£) |
Increase (%) |
| National Living Wage – 21 and above |
£12.21 |
£0.77 |
6.7% |
| 18-20 Year Old |
£10.00 |
£1.40 |
16.3% |
| 16-17 Year Old |
£7.55 |
£1.15 |
18% |
| Apprentice Rate |
£7.55 |
£1.15 |
18% |
| Accommodation Offset |
£10.66 |
£0.67 |
6.7% |
It's important to note that the specific details of the Budget and its impact may vary depending on individual circumstances. The outlined changes will require careful planning and stronger engagement with payroll professionals.
Are you a director paid at the NI Secondary threshold or an employer who requires support with employment costs for 2025/26? Get in touch with our expert team at payroll@cannon-williamson.co.uk
For tailored advice, consulting with us and discussing possible opportunities is recommended.
Register to receive our monthly Newswire and keep up to date with our blogs Register