Whereas recent Budgets have reduced National Insurance Contributions (NIC), today the Chancellor announced the leaked and anticipated increase in Employers NIC from 13.8% to 15% with effect from April 2025.
Legislation will also be introduced to reduce the threshold at which employers start paying NIC on each employee’s salary from £9,100 to £5,000 per annum – taking effect from 6 April 2025 until 5 April 2028. From April 2028, the threshold is expected to increase in line with the Consumer Price Index (CPI).
As a result of these measures, businesses will contribute more to the Exchequer, generating around £25billion – over half the £40billion of tax rises announced in the Budget so clearly the most significant tax raising measure.
Although the NIC increases may generate concern on the impact on hiring and wages, an increase in the Employment Allowance from £5,000 to £10,500 will be welcomed by smaller employers.
Historically, only employers whose NIC liability was less than £100,000 were able to claim the Employment Allowance. This restriction has been removed, which means up to 865,000 employers will pay no NICs next year.
The Chancellor confirmed the corporation tax main rate would not exceed 25% for the lifetime of the Parliament and the £1 million Annual Investment Allowance (AIA) has been retained.
However, the “Corporate Tax Roadmap” is certain to modernise the UK tax legislation, including transfer pricing; permanent establishment; and diverted profits tax. This will remain an area to keep a close eye on.