Employers Get a Bump, Employees Might Get a Boost – Here’s What the Chancellor Just Announced
Heads up, businesses! The Chancellor has decided to jack up the National Insurance (NI) rate for employers. From April 2025 onward, the extra tax will be 15% on top of any earnings above £175 a week. That’s a solid 1.2% increase that could cost the power‑house bacon‑butchers and corporate giants alike.
What About the Revenue? “£25 Billion a Year”
Rachel Reeves told the floor that the new rules will pull in a whopping 25 billion pounds each year. She warned that the decision was hard to make and wouldn’t just hit the balance sheet – it’ll ripple out to affect everyone, business‑owners and their employees alike.
Thresholds: More People Will Pay
Two key changes:
- The minimum annual payout point will drop from £9,100 to just £5,000. That means more workers will find themselves in the NI tax net.
- Even lower‑earning staff will see their contributions increase, which could squeeze budgets, particularly in start‑ups and SMEs.
Tax Let‑Go – No “Freeze” on Income Tax
The Chancellor didn’t shy away from the tax side of things. He promised to stick to all his
“promises on tax”
that appeared in the manifesto. That means no extended freeze on income‑tax breaks and NI thresholds. From the 2028–29 tax year on, personal thresholds will be adjusted with inflation – as normalised. The guiding call is simple: protect working people, not just the corporate cash‑flow.
HR Managers, Listen Up – Benefits Might Be the Cool New Currency
Matt Russell, the CEO of Zest, a benefit‑tech company, thinks the NI hike will make employers look for cheaper ways to reward staff. He points out:
- Half the firms (49%) have already upped their benefit spend over the last year, investing in what keeps talent happy and productive.
- 47% of employees say that benefits trump salary when choosing a job. So, giving a good perks package can pull in talent that wants more than just a higher paycheck.
- Salary sacrifice is a handy trick: it reduces employees’ NI and gives employers a break. Zest’s customers claim they’re saving a cumulative over £6.5 million every month by tweaking payroll this way – and reallocating the money into the perks that actually matter.
Bottom line: As the extra insurance bites into payroll costs, the smartest employers will replace some of that expected raise with higher‑quality benefits and flexible compensation. Employees, meanwhile, should keep an eye out for companies that treat perks as a real part of the job package—after all, in today’s market, a cool benefits box can be a game‑changer.
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