From the small business perspective, the big news from the Budget was the announcement of a significant increase in the rate of Employer NIC, from 13.8 per cent to 15 per cent, effective from 6 April 2025.
Employer NIC is payable on an employees’ earnings in excess of the Secondary Threshold, currently £9,100 a year.
But with effect from 6 April next year, and until 6 April 2028, the Secondary Threshold will reduce to only £5,000, increasing the amount of employees’ earnings that are chargeable to Employer NIC.
The Employment Allowance, which allows businesses with annual Employer NIC bills of £100,000 or less to deduct £5,000 from their Employer NIC bill, will be increased to £10,500 from next April, and the £100,000 threshold for eligibility will be removed.
This will be of more benefit to smaller businesses employing relatively few staff.
The cost to business of the above measures could be around £938 per annum for each employee on a wage of £36,000.
Businesses in labour-intensive sectors such as construction and hospitality are likely to be particularly affected, and we can expect to see impacts such as reduced hiring, lower pay settlements and even redundancies filtering out into the real economy in the coming months.
Offshoring and outsourcing will become more attractive for some sectors such as fintech and professional services.
The OBR has predicted that as much as 75 per cent of the cost of the NIC increase will ultimately be borne by employees.
