Budget 2024: Employer NICs up 1.2% and threshold cut but employment allowance raised

Chancellor Rachel Reeves has raised the National Insurance Contributions (NICs) for employers by 1.2%. However, she has also raised the employer's allowance, which means that 865,000 smaller businesses will not have to pay any NICs at all in the coming year.

In her inaugural Budget speech this afternoon, Reeves (seen in the image) announced to Parliament that the employer's National Insurance rate would rise by 1.2 percentage points, reaching 15% starting in April 2025.

She mentioned that the government will lower the secondary threshold, which is the point at which employers begin to pay National Insurance contributions for each employee's salary, from £9,100 a year to £5,000.

"This is expected to generate £25 billion annually by the conclusion of the projected period," Reeves added.

"I understand that this is a tough decision to make. I'm not making this choice without careful consideration."

"We are requesting that companies increase their contributions, and I understand that the effects of this decision will extend beyond just the business sector, as mentioned by the Office for Budgetary Responsibility (OBR) today."

"Given the situation I've found myself in, this is the best decision to take."

Reeves also mentioned that after receiving feedback from the Federation of Small Businesses and others, the employment allowance will increase from £5,000 to £10,500.

Reeves stated that this indicates that 865,000 employers will not have to make any National Insurance payments next year, while more than a million will continue to pay the same amount they did before.

"This will enable a small business to hire the equivalent of four full-time employees at the National Living Wage without having to pay any National Insurance contributions."

Reeves promised that she wouldn't raise the National Insurance rates for those who are employed.

"I promise working individuals that I won't raise your National Insurance contributions," Reeves stated. "I won't hike your VAT, and I won't increase your income tax either."

Employees won't notice an increase in their taxes on their paychecks due to the decisions I'm making today.

"That's a commitment that was promised and successfully delivered on."

However, Reeves emphasized that any accountable chancellor must be willing to make tough choices to increase the funding necessary for public services and to achieve economic stability.