Before the Budget, the Chancellor and Prime Minister reaffirmed their commitment to not increase Income Tax, VAT and National Insurance for ‘working people’.
Interestingly, the rumoured extension to the tax freeze beyond 2028 also did not go ahead, with personal tax rates in 2028-29 rising in line with inflation.
Instead, Ms Reeves set out changes to employers’ National Insurance Contributions (NICs) that will raise an additional £25 billion.
This huge injection of cash into the public finances will be raised by increasing the rate of employer NICs by 1.2 percentage points from 13.8 per cent to 15 per cent from 6 April 2025.
If this change wasn’t significant enough, the threshold (per employee) at which employers begin paying NICs will decrease from £9,100 to £5,000 per year.
To help the smallest of businesses, the Employment Allowance will increase from £5,000 to £10,500, while also removing the existing £100,000 threshold on employers’ Class 1 National Insurance liabilities.
The National Living Wage (NLW) will rise by 6.7 per cent to £12.21 per hour from April 2025 – adding £1,400 to the annual earnings of a full-time worker on the NLW.
The National Minimum Wage (NMW) for 18-20-year-olds will also increase by 16.3 per cent to £10.00 per hour – the largest rise ever in both cash and percentage terms.
The Government is also working towards a unified adult wage rate and has tasked the Low Pay Commission (LPC) with recommending a minimum wage for 18-20-year-olds that will gradually bridge the gap with the main NLW rate.