Chancellor Rachel Reeves has increased employer’s National Insurance Contributions (NICs) by 1.2%, but also increased the employer’s allowance exempting 865,000 smaller employers from paying any NIC at all next year.
Delivering her first Budget speech this afternoon, Reeves (pictured) told Parliament the rate of employer’s National Insurance would increase by 1.2 percentage points to 15% from April 2025.
She added government will also reduce the secondary threshold – the level at which employers start paying National Insurance on each employee’s salary – from £9,100 a year to £5,000.
“This will raise £25bn per year by the end of the forecast,” Reeves continued.
“I know that this is a difficult choice. I do not take this decision lightly.
“We are asking businesses to contribute more and I know that there will be impacts of this measure felt beyond businesses too as the Office for Budgetary Responsibility (OBR) has set out today.
“But in the circumstances that I have inherited, it is the right choice to make.”
However, Reeves added that having heard representations from the Federation of Small Businesses and others, the employment allowance would also rise from £5,000 to £10,500.
“This means 865,000 employers won’t pay any National Insurance at all next year and over one million will pay the same as they did previously,” Reeves said.
“This will allow a small business to employ the equivalent of four full time workers on the National Living Wage without paying any National Insurance.”
Employee NICs unchanged
Reeves also pledged that she was not going to increase the rate of NI on working people.
“I say to working people, I will not increase your National Insurance,” Reeves said. “I will not increase your VAT. And I will not increase your income tax.
“Working people will not see higher taxes in their pay slips as a result of the choices I am making today.
“That is a promise made and a promise fulfilled.”
But Reeves added any responsible chancellor would need to make the difficult decisions to raise the revenues required to fund public services to restore economic stability.
