Autumn Budget 2024 Income Tax and National Insurance for Individuals and Employers
Published / Last Updated on 08/11/2024
Income Tax Rates and National Insurance Thresholds for Individuals
The Chancellor confirmed that income tax and national insurance contribution thresholds for individuals will remain frozen until 2028 as confirmed by the previous Conservative government, but the new Labour government confirmed that from 2029, these thresholds will increase in line with Consumer Prices Index (CPI) inflation.
Child Benefit - As confirmed by the previous Conservative government and now by the new Labour government, the increase in the highest earner income threshold from which child benefit starts to be reduced will increase from £50,000 to £60,000. This is a reduction of £1 child benefit for every £200 of income in excess of £60,000. Also re-confirmed is that the threshold for the higher earner income when all child benefit stops will be £80,000.
National Insurance Contributions (NIC) for Employers
One of the biggest stings in the Autumn Budget was on employers.
- From 6th April 2025, employers NIC will increase from 13.8% to 15%. This is payable on all earnings above the employers NIC Secondary Earnings Threshold.
- Employees will continue to pay NIC from the Primary Threshold of £242 per week i.e., £12,570 pa (also the personal tax allowance threshold).
- Employers Secondary Earnings Threshold (the point at which employers pay NIC on their employee’s earnings will reduce from £175 per week (£9,100 pa) will reduce to just £5,000 pa (£97 per week).
- With the National Living Wage (£12.21 per week), this means an employer will be paying employers NIC even if a part-time works just 8 hours per week.
Larger and Medium Employers
- This is crippling news for many medium and larger employers. Pay rise increases lead to increased pension contribution costs, holiday pay costs, redundancy pay costs as well as larger employers national insurance contributions at 15% from a much lower secondary earnings threshold of just £5,000 pa earnings.
- If employers have a NIC bill of over £100,000, they are still able to claim Employment Allowance i.e., deduct £5,000 from their NIC bill.
- The good news is the Employment Allowance is increasing to £10,100 from £5,000 so it will soften the blow for all employers but not by much.
Smaller Employers
- There was some joy for many smaller employers with a handful of employees.
- The new £10,100 Employment Allowance will mean many smaller employees will not pay any employer’s NIC until you have 4 employees, working 35 hours per week on National Living Wage.
- 4 employees working 35 hours per week = £22,225.00 pa each. That’s total payroll of £88,900.00. With an employers NIC Secondary Earnings Threshold of £5,000 pa each, this equates to a total employer’s national insurance bill of £10,335.00 less £10,100 Employment Allowance meaning employers NIC to pay of just £225.
Initial Thoughts
- Expect lower recruitment and lower business expansion.
- Expect redundancies.
- Expect lower or even no pay rises (over and above National Living Wage).
- Expect other employer benefits to improve such as bigger employer pension contributions or more staff leave/holidays or greater flexible working opportunities.
- As a last resort, expect some larger employers to shift call centres, servicing or production overseas.
