By hayley - This year’s Budget, announced by the Chancellor, has delivered a mix of updates that employers need to be aware of, especially when it comes to payroll management and cost planning.
One of the most significant changes is the one to Employers NI liability. Three changes are set to come in from April 2025…
• Employers NI rate increasing from 13.8% to 15%
• The lowering of the Secondary Threshold (point at which employers start to pay Employers NI) from £9100/year to £5000/year
• Increase to the Employment Allowance to £10,500 for tax year 2025-2026
These three elements will affect employers NI liability. But the true impact depends a little on the size and pay costs of individual business. Small employers may see no change, or some may even see a small cost saving. Big business, however, will see substantial increases in their Employers NI liability. With these changes looming, businesses need to complete a payroll cost analysis, review their payroll budgets to manage the financial implications.
In addition, there were updates to personal tax allowances and thresholds, with the Chancellor freezing these until 2028. While this doesn’t directly change what businesses need to do payroll-wise, it does mean that employees may feel the squeeze, as inflation erodes their take-home pay. Employers might see more requests for pay rises, which could add pressure to payroll budgets.
Ultimately, this Budget underscores the need for businesses to stay agile and ensure that their payroll systems are equipped to handle, not only these changes, and the many more coming in the next few years, but also the ripple effects they may have on employee expectations, retention, and financial planning.
I recommend completing a cost analysis to prepare yourself and your business for the upcoming changes, and to effectively manage your cash flow.
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Hayley