The Autumn Budget 2024, announced by Chancellor Rachel Reeves, brings several updates that will impact employers, HR teams, and payroll management across the UK. From wage increases to National Insurance adjustments, this blog summarises the key changes to help your business stay informed and proactive.
1. National Living Wage Increase
From April 2025, the National Living Wage will rise to £12.21 per hour for over-21s, a 6.7% increase from the previous rate. The National Minimum Wage for 18 to 20-year-olds will see a record increase of 16%, reflecting the government’s aim to move towards a unified adult rate.
Impact on Employers: These wage increases are designed to address cost-of-living challenges, but they may increase payroll costs for businesses across all sectors. Employers will need to adjust their payroll planning and budgets to accommodate these higher wage rates, particularly if they employ a large number of younger workers.
Employer Action: Reviewing payroll budgets now can help ensure your business is prepared. Talk Staff is here to support you with payroll planning to keep your operations smooth and compliant.
2. Employer National Insurance Increase
Another major change from April 2025 is a 1.2% increase in Employer National Insurance contributions, taking the rate to 15%. Alongside this, the threshold at which contributions are calculated will be lowered, meaning that employers may face increased NI costs per employee.
Impact on Employers: This adjustment increases overall payroll expenses, especially for larger businesses. The combination of higher rates and a lower threshold could place a notable financial burden on some employers, so preparing for these changes will be key.
Employer Action: Employers may want to consider working with payroll advisors to ensure they remain compliant while managing cost increases effectively. Talk Staff’s payroll services are here to help you stay ahead of these changes and forecast accurately.
3. Employment Allowance Increase
The Employment Allowance will double to £10,500 in 2025, providing eligible employers with a way to offset their NI costs. This increase could result in significant savings, particularly for smaller businesses.
How Employment Allowance Works: Employment Allowance is a measure allowing eligible employers to reduce their Class 1 National Insurance liability each tax year. Employers can claim up to the annual limit (now £10,500) before returning to standard NI contributions.
Eligibility: To qualify, your business’s employer National Insurance bill must be below £100,000 from the previous tax year. Certain businesses, such as public bodies and companies with only a single director, are excluded from this allowance.
Employer Action: Maximising the Employment Allowance could be a valuable tool for managing payroll costs. Talk Staff can guide you through the process of applying and ensure you make the most of these savings.
4. Income Tax Threshold Freeze Ending
Contrary to speculation, the government has decided not to extend the freeze on income tax and National Insurance thresholds beyond the current plan, which ends in 2028. Starting in 2028-29, thresholds will adjust with inflation, easing tax burdens on middle-income earners by lifting tax brackets incrementally over time.
Impact on Employers: The gradual unfreezing of thresholds may relieve some of the tax pressures employees face, potentially reducing wage pressures on employers. Employers should remain informed about these changes to anticipate how they may impact employee net pay.
Employer Action: This unfreezing may be a point of interest for employees concerned about their tax position. HR teams may consider preparing to communicate the potential impact of these threshold adjustments to help answer employee questions. Talk Staff’s payroll and HR experts are here to support any questions you may have.
5. Strengthened Employment Rights
The Chancellor also referenced new protections for unfair dismissal, workplace bullying, and expanded rights around paternity and maternity as part of ongoing employment reforms. These updates fall under the Employment Rights Bill, which has been detailed in our dedicated blog post. For more insights into these expanded rights and how they may impact your business, visit our comprehensive overview.
How will you plan for the future?
The Autumn Budget 2024 outlines significant changes that will impact businesses’ payroll, tax planning, and employee relations. Proactively preparing for these updates will help your organisation stay resilient and compliant. Talk Staff is here to support you in navigating these changes, from payroll planning to ensuring compliance with employment laws.
💬 Contact us today or visit our website to learn more about how these changes may impact your business and how we can help you prepare.