Changes to the tax regime and other statutory financial regulations tend to get announced well ahead of them coming into force. So much so that it can be tricky to remember what new rules are coming into force, when.
As the start of the new tax year, April is always the busiest time in this regard. Changes flagged months in advance all come into force at once. It’s therefore always a good idea to start the new financial year by reminding yourself of what those rules are and how they will affect you.
This April is a particularly busy one for payroll departments, with changes to National Insurance Contributions (NIC) and to statutory payscales all coming into force at once.
Here’s a quick summary of what your payroll department needs to know for the 2024/25 tax year.
NIC Employee Rates Reduced
From April 6, the main rate of primary Class 1 National Insurance contributions was cut by 2 percentage points from 10% to 8%.
This applies to employee contributions only – the Class 1A employer contributions on taxable benefits in kind, and Class 1B contributions on PAYE settlement contributions, both remain at the same rate of 13.8% for 2024/25.
This means there is no cost benefit to employers. However, all businesses will need to make sure their payroll software has been updated to process the employee calculations. If you outsource your payroll to a third-party adviser, contact them to ask how these changes have been implemented before the next pay cycle.
National Minimum Wage Increased
While the NIC changes for 2024/25 have no cost implications for employers, increases to the National Minimum Wage very much do. The increases in all age categories are in excess of £1 an hour, while the 21-22 age bracket has been abolished, meaning all workers aged 21 and over now qualify for the National Living Wage – the non-age adjusted statutory minimum.
Adjusted rates still apply for 16 to 17 year olds, 18 to 20 year olds, and apprentices. The new rates and percentage increases are as follows:
- National Living Wage – £11.44 an hour (9.8% increase)
- 18 to 20 year olds – £8.60 (14.8% increase)
- 16 to 17 year olds – £6.40 (21.2% increase)
- Apprentices – £6.40 (21.2% increase)
These changes were recommended by the Low Pay Commission to tackle what is perceived to be the disproportionate impact of high inflation on low earners and young people. Nonetheless, these represent significant cost increases for small businesses in particular to absorb, and will have an impact on budgets for the next year as well as on payroll.
Statutory Leave Pay Increased
Along with increases in the National Minimum Wage, employers face another uplift in the cost of employment with higher statutory leave rates. From April 8, rates for sick pay, maternity, paternity and shared parental leave pay, plus bereavement pay and adoption pay, all increase.
You can find a summary of the changes on the Federation of Small Businesses website.
Please contact our payroll team if you have any further queries.
