Rachel Reeves delivered her first Budget on 30th October – here are some of the main points affecting payroll.
Tax and National Insurance (NI)
- Employer’s NI to be increased by 1.2% to 15% from April 2025
- Employer’s NI Secondary Threshold decreasing from £9,100 to £5,000 from April 2025
- Employment allowance increasing from £5,000 to £10,500 and the £100,000 threshold for claiming the allowance will be removed (however, all other eligibility criteria still need to be met) from April 2025
- Income tax and NI threshold freeze won’t be extended beyond 2028/29
- Employer NI relief for employing veterans will be extended for a further fiscal year
- The Lower Earnings Limit (LEL) and Small Profits Thresholds will increase by Septembers CPI rate of 1.7% from 2025/26
- The Married Couples Allowance and Blind Person’s Allowance will be uprated by 1.7% from 6 April 2025.
- Company car tax rates will be set for 2028/29 and 2029/30 to allow business to plan long term o Zero emission and electric vehicles will increase by two percentage points in each year rising to 9% in 2029/30
- Cars with emissions between one and 50g of CO2 per kilometre will rise to 18% in 2028/29 and 19% in 2029/30
- All other bands will rise by one percentage point in both 20218/29 and 2029/30
- Van Benefit Charge and Car and Van Fuel Benefit Charge will both uprate by CPI in April 2025.
Considerations
Employment costs will be increasing for a lot of businesses with an increase in the rate of employer’s NI and the decrease in Secondary Threshold hitting employers twice. However, this is balanced for small employers with an increase in the Employment Allowance and a removal of the eligibility threshold. The increase in employer’s NI does mean that salary sacrifice savings, for things like pension contributions, become more attractive. While not impacting immediately, the thresholds being promised to increase from 2028 will be a welcome announcement for many employees. Expectations may need to be managed regarding the timelines involved with eventual changes.
