News & Events
Budget 2024: Key pay-related changes employers need to know
20th November 2024
The first Budget under the new Labour government has introduced significant changes impacting payroll and employee compensation. With new rates, thresholds, and expanded employer responsibilities, businesses will need to adapt. In this article Rowleys’ Payroll Manager, Rebecca Gotch, shares a breakdown of the main pay-related updates and what they mean for employers.
National Living Wage and National Minimum Wage increases
From 1 April 2025, the National Living Wage (NLW) will rise to £12.21 per hour for those aged 21 and over. The National Minimum Wage (NMW) has also seen increases, with rates set at:
- £10.00 for those aged 18-20,
- £7.55 for 16-17-year-olds, and
- £7.55 for apprentices under 19 or in the first year of an apprenticeship.
For an NLW worker on a 37.5-hour week, this will result in an annual gross pay increase of £1,505.54. Employers should prepare for adjustments and communicate these changes to affected staff.
Income tax and National Insurance Contributions (NICs)
Income tax bands
- The basic rate of 20% will apply to the first £37,700 of taxable income, with the 40% rate starting at £50,270.
- The additional 45% rate will apply to income over £125,140.
- These bands are frozen until April 2028, after which they are expected to increase in line with inflation.
Personal allowance
- The personal allowance remains at £12,570 until April 2028, when it will also begin adjusting for inflation.
- High earners with an adjusted net income over £100,000 will continue to see a reduction in their personal allowance, phasing out entirely at £125,140.
National Insurance Contributions (NICs)
- From April 2024, the main rate of Class 1 employee NICs is set at 8%, with the employer rate increasing to 15% from April 2025.
- The Secondary Threshold, at which employers start paying NICs, will drop from £9,100 to £5,000 from April 2025 until April 2028.
- Employment Allowance will increase from £5,000 to £10,500 from April 2025, making it easier for small businesses to manage their NICs obligations. It was also announced that the £100,000 threshold will be removed, allowing more employers to benefit from the allowance.
Expanded employer obligations for benefits in kind and company cars
Employers providing company cars or other benefits in kind should take note of upcoming increases in taxable rates:
- Zero-emission car charges will rise from 2% to 3%.
- All other car benefit rates will increase by 1%, with a maximum benefit charge of 37%.
The car fuel benefit charge will also increase from 6 April 2025, adjusted in line with inflation.
Payrolling benefits
The Budget reaffirmed the government’s commitment to expanding the payrolling of benefits in with the aim to simplify the process for both employers and employees.
From April 2026, employers will be required to report benefits in kind through their payroll, simplifying compliance for both income tax and Class 1A NICs.
Find out more about payrolling benefits.
Support for Veterans and Self-Employed NICs Adjustments
- Employer NICs relief for hiring qualifying veterans will be extended for another year until April 2026.
- Self-employed NICs remain at 6% and 2%, while those earning above the Lower Earnings Limit of £6,500 will receive contributory benefits without needing to pay Class 2 NICs.
Ensure you are compliant with the changes with a Payroll Health Check
This Budget introduces a host of payroll changes that can impact your bottom line and compliance obligations. With so much to consider, we offer a Payroll Health Check to help you to assess how the new Budget measures will affect your payroll processes, benefits offerings, and tax obligations. Our team can guide you through planning, compliance, and strategic adjustments to streamline your payroll function and ensure compliance with these new measures.
Get in touch with Rowleys today to schedule your Payroll Health Check to provide you with the peace of mind that your payroll is compliant.