The upcoming Autumn Budget 2024 is set to introduce significant changes to Employers' National Insurance Contributions, with Chancellor Rachel Reeves preparing what could be the largest tax rise in Labour's first budget for 15 years.
Numerous insiders are now reporting that under proposals being considered by the Treasury, Employers' National Insurance Contributions could increase by up to two percentage points from the current rate of 13.8 percent.
Going up to 15.8 percent for employers would primarily affect private sector businesses, as public sector employers, including the NHS and government departments, are expected to receive reimbursement from the Treasury.
The proposed measures, which align with the government's broader economic strategy, are projected to generate approximately £20 billion in additional revenue, which is to be earmarked for supporting the NHS and addressing the current challenges in public finances.
For perspective, a business employing ten workers with annual salaries of £25,000 each would see their yearly National Insurance contributions rise from £22,000 to £25,000 under a 2% increase. An additional cost of £3,000 annually or £250 a month.
The change will be more pronounced the higher the average payroll as employer's have an NIC threshold of £9,100 on each employee - so an average payroll of £40,000 with ten employees would see the bill go from £43,000 to £49,000 - an increase of £6,000 annually or £500 a month.
For businesses preparing for these changes, it's crucial to note that the proposals also include potential adjustments to the earnings threshold at which employers start making National Insurance contributions - as noted above currently £9,100 (£175 a week). This comprehensive reform of the employers' National Insurance system marks one of the most significant tax policy shifts in recent years.
You can use our special Budget 2024 Employer's National Insurance Calculator to see how these changes could affect your business.
In preparation for these changes, the Chancellor has already announced modifications to the fiscal rules, creating space for increased borrowing to support public investment. This strategic shift in fiscal policy demonstrates the government's commitment to balancing economic growth with sustainable public finances.
The Budget 2024 predictions suggest this could be just one of several significant tax adjustments as the government seeks to address public sector funding challenges. The move represents a clear shift in approach to business taxation, with larger enterprises expected to contribute more to public services.
While the final details are yet to be confirmed, the direction of travel is clear: businesses will be asked to play a larger role in funding public services, particularly the NHS.