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The blacK hole budget
Mathew Akrigg MCIPPdip MAAT, CIPP policy and research officer, highlights the key takeaways for payroll from this year’s budget
T he weeks up to this budget have been fraught with contention and there have been many rumours, murmurs and whispers about what might or might not be within it. This happens around every budget, with leaked policies usually creeping closer to the truth as time goes on. On this occasion, the stage was firmly set for a budget that needs to fill a black hole of public finance, so to say there was an air of trepidation would be an understatement. The Labour manifesto was clear in its intentions on improving worker rights and the government started to make progress on this goal with the introduction of the Employment Rights Bill 2024. In recent weeks, however, a key area of contention was the commitment to not increase taxes on working people. The debate and media
coverage of this has raged on for what feels like an eternity, but putting aside the politics, let’s consider how the policy will impact payroll. There is a lot to dive into from the speech delivered by chancellor of the exchequer Rachel Reeves, so, without further ado, here are the key bits of the budget that you will need to understand as a payroll professional working in the UK. National Insurance (NI) Let’s start with the big one: employer’s NI is going up to 15% from 13.8% from April 2025. This was widely speculated on before the budget, but what wasn’t on the radar was the following announcement: the secondary threshold would also be brought down from £9,100 to £5,000. These changes represent additional employment costs of £615 per employee
who already earns over the current threshold for the next tax year. While it raises a considerable amount of revenue for the Treasury, it places a significant burden on employers. Small employers get a tiny respite, as the employment allowance (EA) is to be increased from £5,000 to £10,500 and the qualifying threshold of £100,000 is to be removed (other criteria still apply). For most employers though, this will do little to break even on the increased employment costs imposed. It is worth noting that these changes will make salary sacrifice arrangements more enticing for employers on benefits such as pension contributions and electric cars. This is a far cry from some of the speculation which posited that NI relief on employer contributions would be removed or amended in a move that could
| Professional in Payroll, Pensions and Reward | December 2024 - January 2025 | Issue 106 63
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