Today (30th October), the Chancellor Rachel Reeves took to parliament to release the first Budget of the new government.
It was a momentous occasion, with Reeves becoming to first female Chancellor to produce a Budget.
Following on from their commitment to ‘make work pay’, the government were clear both before and during the Budget that there would be no increase in taxes on ‘working people’ – despite the £40bn tax rises announced.
The Chancellor did announce changes to the taxes paid by employers, as well as increases to the National Minimum Wage. Below are the key changes that will impact on SME employers.
National Living Wage and National Minimum Wage increases
Labour has previously promised to push for National Living Wage (NLW) and National Minimum Wage (NMW) to increase in line with the cost of living, as well as a removal of the age bands.
This budget is the first signs we see of this, with NLW increasing by 6.4% to £12.21. As they push towards a single rate, Reeves also announced a 16.3% increase in the NMW for 18- to 20-year-olds – taking it to £10.00 per hour.
Apprenticeship wages will also increase, from £6.40 to £7.55. These changes will come in April 2025.
National Insurance Contributions
Hinted at prior to the Budget, confirmed during it, was an increase in Employer National Insurance Contributions (NICs). These will increase by 1.2% to 15%, from April 2025.
It was also announced that the secondary threshold (the level where you start paying NICs) will be reduced from £9,100 to £5,000. NICs may also be paid on some employee benefits.
Employment Allowance
One change which may go some way to offsetting the impact of the increase in NICs is the expanded Employment Allowance.
It has been announced that this will increase from £5,000 to £10,500.
Other changes that may affect you
Frozen Business Rates for Hospitality, Leisure & Tourism
Business Rates in the Hospitality, Leisure & Tourism currently have a 75% relief on them, which was due to expire in April. The Chancellor announced that for the 25/26 financial year, this relief will be 40%.
Changes to Carers Allowance
It was announced that the working limit for Carers Allowance will be lifted next year. Carers would therefore be allowed to work more hours, whilst still claiming the benefit. The Chancellor says that this means carers would be able to work up to the equivalent of 16 hours at National Minimum Wage.
Capital Gains Tax
One thing to factor into your potential exit strategy is an increase announced to Capital Gains Tax. The lower rate will be increasing from 10% to 18%, with the higher rate going from 20% to 24%.
We’re here to help
If you need assistance with implementing these changes in your business, The HR Dept is here to help. Contact your local expert to discuss the impact and how you can manage the change.
