You will have seen the headline announcements in the Labour Budget 2024 of an increase in the rate of employers NI from 13.8% to 15% with a drop in the threshold at which it is payable from £9,096 to £5,000. Thankfully for smaller employers there was also the sweetener of an increase in the employers allowance from £5,000 to £10,500. There are a number of different bands of companies depending on size and the impact on each is slightly different and example of each follow:
- Sole director / one man band company
These are usually paid at the personal tax allowance (£12,570) level as the extra cost of employers NI over the existing £9,096 threshold is less than the saving in corporation tax - this saving amounted to £271 for 2024/25, but with the changes in the bands above will be reduced a little to £238 from 2025/26
- Family / husband-wife type companies
Typically for the husband wife companies, each employee is paid more than £758pm and the employment allowance covers any employers NI due, so this will not change with the Budget
- Larger companies with a number of employees
Any company where the employers NI is well below the new £10,500 allowance should not be affected, it may even mean a tax cut as despite the increase in rate and reduction in the threshold the big increase in the allowance may cover the bill. This probably will only apply to companies with 3-5 employees.
An example of a real company with 14 employees with a £19k employers NI bill for 2023/24 shows an increase of £8.6k in the bill for the year. The additional employment allowance of £5.5k meant the net effect is a £3.1k increase in the cost of employing staff. A number of the employees are part time so any company employing full-timers will notice a significant increase in costs. Clients should let us know if they would like an indication of costs which can be done on a case-by-case basis.
Any finer details of the Employers NI Changes in 2024 Budget will become apparent over the next few months before payroll updates are issued for the start of the new tax year so you should seek professional advice before taking any steps based on these contents. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Shrewsbury, Shropshire – Accountants who “speak your language”