We knew there was going to be an increase in taxes in the 2024 Budget, it was inevitable. Rachel Reeves certainly did not hold back in the increase in taxes for employers. Here we summarise the changes announced.
National Insurance Contributions (NICs) Changes
Adhering to her government’s promise on tax increases, Rachel Reeves confirmed that there has been no increase in employee’s National Insurance Contributions (NICs).
However, employer’s NI is to be increased by 1.2pp from 13.8% to 15%. If that is not bad enough, then there is a further sting in the tail. The per-employee threshold at which employer’s start to pay NI will be reduced from £9,100 per year to £5,000 per year thus bringing more income into employer’s national insurance net. These changes will apply from 6 April 2025 and will make the cost of employing individuals significantly higher for most businesses.
At the same time, as a measure to support small businesses, the government is helpfully increasing the Employment Allowance. The current Employment Allowance gives employers with National Insurance bills of £100,000 or less a discount of £5,000 on their employer NICs bill. This Employment Allowance is to increase to £10,500 next year. They are also expanding the Employment Allowance by removing the £100,000 eligibility threshold. This will, therefore, give a little bit of relief to employer’s burgeoning payroll bills.
Reporting of benefits in kind
The use of payroll software to report and pay tax on benefits in kind will become mandatory, in phases, from April 2026. This will apply to income tax and Class 1A NIC. This may appear to be quite a simple measure but there can be complications calculating payroll amounts, particularly for employees joining and leaving part way through the tax year.
Electric Vehicles (‘EV’)
The government is strengthening incentives to purchase EVs by widening the differentials in Vehicle Excise Duty First Year Rates between EVs and hybrids or internal combustion engine cars. The government is also maintaining EV incentives in relation to taxable benefits on company cars and is also extending 100% First Year Allowances for zero emission cars and EV charge points for a further year until 2026. For employers considering company car renewals this may be a key cost consideration.
Contact Mercer & Hole
If you are an employer and would like to discuss your options, please do not hesitate to contact myself or any member of the Corporate and Business Tax Team. As with any changes to regulations, taking time to review your options is always the best strategy. We can help and support you and your business.
Share post
8 mins 
