The 2024 Autumn Budget, delivered by Chancellor Rachel Reeves on 30 October, brings significant changes for employers, including in relation to National Insurance, wage standards, and tax thresholds. The Chancellor has framed the Budget as pushing towards bolstering public finances and economic stability, although in doing so it imposes new costs and responsibilities on businesses. Below are the key aspects of the Budget relevant to employment and HR.
From April 2025, employers’ NI will see an increase to 15% and a lowered threshold of £5,000. The Chancellor acknowledged the financial impact this will have, especially on smaller businesses, which led to the increase in Employment Allowance from £5,000 to £10,500. Notwithstanding this move to alleviate the pressure on SMEs, all employers will need to prepare for this substantial rise in employment costs, and HR professionals should consider its implications for recruitment and salary budgeting.
The Budget announced a 6.7% rise in the National Living Wage, bringing it to £12.21 per hour for workers aged 21 and above, effective April 2025. Meanwhile, 18-20-year-olds will benefit from a record-breaking 16.3% increase in the National Minimum Wage, raising it to £10.00 per hour. These hikes underscore the government’s commitment to improving pay for lower-income workers, but they also represent additional costs for employers, particularly in sectors with large hourly-paid workforces. Employers will need to adjust payroll budgets accordingly and potentially revisit staffing models to accommodate the wage increase.
Effective April 2025, the government will replace the non-dom regime with a residence-based taxation system. Previously, non-domiciled UK residents could elect to pay UK tax solely on their UK-based income and on foreign income only when it was remitted to the UK. The new residence-based taxation system may affect the attractiveness of the UK to international talent, as newly arriving foreign workers will now be taxed on global income. Employers recruiting from abroad may need to reconsider relocation packages and offer tax-related support to mitigate the impact of these changes.
The Budget introduces increased CGT rates of 18% and 24%, and further changes to relief rates will be phased in over the coming years. Additionally, carried interest will be taxed at a flat rate of 34.625%, with earlier incremental adjustments. These tax adjustments will likely necessitate a review of employee benefit schemes that rely on stock options, profit-sharing or carry (such as in Private Equity).
With the recent Employment Rights Bill in mind, the Budget reinforces the government’s focus on worker protections, for example confirming again that there will be reviews of parental and carer’s leave systems. It’s anticipated that there will be enhancements to these areas. Employers should therefore prepare to revise policies in line with upcoming enhanced protections.
To aid with rising operational costs, the government has extended fuel duty relief for another year and upheld a 40% business rate relief for retail, hospitality, and leisure sectors. Employers in these industries may find this to be a financial reprieve amid the higher employment costs imposed by the NI and wage increases.
The Budget introduces significant financial and regulatory shifts for employers, which twinned with upcoming changes confirmed in the Employment Rights Bill, make this a time of substantial change. We advise employers to plan carefully around budget adjustments and remain agile to accommodate further incoming employment law changes.
For specific queries on adapting to these budget changes, please contact our Employment team to discuss.
