What was an expectant nation has now had a chance to absorb the implications of the first Labour Government’s Budget in 15 years and to decide whether the much-touted promise, not to increase taxes on “working people”, held true.
If you are an employer or an employee and feel some of the areas subsequently detailed in this article might impact upon you, our experienced Employment Law team is on hand to support you through any difficulties you are facing. To discuss how we can help, please contact your local Kingsfords office in Ashford, Cranbrook or Hythe.
National Minimum Wage/National Living Wage (“NMW” / “NLW”)
For staff aged 21 or over, the National Living Wage will increase to £12.21 per hour from £11.44 – an uplift of 6.7%, with effect from April 2025.
Although the government has pledged to abolish age banding for NMW and NLW in the future, (to be replaced with a single adult band), this will be phased in over time.
Initially, for younger staff aged 18-20 the existing rate of £8.60 per hour will be increased to £10.00 per hour from April 2025 – representing a significant uplift of 16.30%. It should equate to the equivalent of an annual pay rise of around £2,500.
Finally those Apprentices and 16 to 17-year-olds in employment will also receive a rise in their pay, seeing their minimum hourly pay increase from £6.40 to £7.55 per hour up a hefty 18%.
Employers National Insurance (“ENI”)
It came as little surprise by reference to the various pre-budget media leaks press, that Employers National Insurance was increased. With effect from April 2025 ENI will by to 15% an uplift of 1.2%. Although this was lower than expected, employers could be seen to collectively wince at the news. Are some employers not also “workers” too?
Some of the pain was in the detail. Specifically the threshold at which employers will start paying the new rate, will be lowered from those staff previously earning £9,000 per anuum, to those earning just £5,000 per year.
There was some respite for smaller employers however in that the Employment Allowance – a government program helping to reduce employers National Insurance costs was adjusted. If an employer has an NI liability of less than £100,000 (calculated from the previous tax year) the rebate will more than double from £5,000 per annum to £10,500 per annum.
The Chancellor asserted that this measure would enable smaller businesses to employ 4 full time works on the NLW without having to pay any National Insurance.
Income Tax
Despite their being no changes to the rates of income tax since 2021, the Chancellor kept the current rates in place, with an indication that they would be reviewed again in 2028.
The basic rate of tax at 20% on earning over £12,570 would apply, alongside a higher rate of 40% on those earning £57,270 whilst the highest rate of 45% would be applied on earnings of £125,140 or more.
More grumbling can be heard by the on-going impact of “Fiscal Drag”, whereby employees will through inflationary increases in their wages, be dragged into paying higher levels of NI.
Mixed Reaction and Comments
The Policy Chair of the Federation of Small Businesses (FSB), Tina McKenzie, said: “Increasing the employment allowance for small businesses by a record amount is a very welcome move and we're pleased the Chancellor has heard us loud and clear”.
However “Larger small, and medium-sized, businesses will struggle with the rises on employer national insurance on top of the large costs from the Government’s employment law plans. We’ve been very clear in our warning of the difficulty SMEs will be confronted with in meeting all of these changes at once – and the potential impact on jobs, wages and prices”.
Unite, the UK’s leading union, has responded to the Labour government’s budget.
Unite general secretary Sharon Graham said: “Having demanded change to the fiscal rules and opposed any return to austerity, we welcome the government’s decision to loosen the borrowing straitjacket and commit substantial new money for our public services.
“The government must now show the vision needed to use its increased borrowing power to invest immediately in our economic infrastructure to generate jobs. We will need concrete plans and a clear timeline for the fabled 650,000 green jobs.
Conversely a poll of over 700 Institute of Directors members following the Budget Statement has found that two-thirds (67%) of business leaders feel negatively towards the Autumn Budget and two-thirds (67%) think that it does not support the Government's growth mission.
Contact Us
If you are an employer or an employee and wish to discuss any of the issues raised our Employment Law team is on hand to support you. Please contact your local Kingsfords office in Ashford, Cranbrook or Hythe. Alternatively, you can send an enquiry and a member of our team will get back to you promptly, by calling us on 01233 665544 or emailing via tnb@kingsfords.net or dbc@kingsfords.net. We are happy to discuss your concerns without obligation.