Autumn Budget: Employment Taxes
Significant changes to employment taxes were outlined in the Autumn Budget, including the extension of low rates Benefit in Kind rates for electric vehicles.
National Minimum Wage and National Living Wage
As announced yesterday and confirmed in the Chancellors Autumn Budget today, significant increases to the National Minimum Wage and National Living Wage will take effect in April 2025.
- National Living Wage (NLW):
The NLW, which applies to workers aged 21 and over, will rise to £12.21 per hour, representing a 6.7% increase. This increase aims to support workers as living costs continue to rise.
- National Minimum Wage (NMW):
For workers aged 18 to 20, the NMW will increase to £10 per hour, marking a 16.3% increase. This is the largest percentage increase for younger workers to date.
- Apprentice Rate:
The apprentice rate will increase to £7.55 per hour, reflecting an 18% increase. This substantial rise is designed to enhance the value of apprenticeship programs and attract more individuals to skilled trades.
These increases for younger workers and apprentices represent a significant milestone and are the first step toward establishing a unified adult wage rate.
National Insurance
The Chancellor also confirmed that there will be no change to Class 1 National Insurance Contributions (NIC) paid by employees, which will remain at the previously reduced rate of 8%, effective from 6th April 2024.
However, there will be a 1.2% increase in the Employers’ NIC rate, raising it to 15% from April 2025. Additionally, the secondary (per-employee) threshold at which employers begin to pay NIC will be lowered from £9,100 per year to £5,000 per year.
To support small businesses facing these changes, the Government is increasing the Employment Allowance from £5,000 to £10,500 and removing the £100,000 threshold, expanding this to all eligible employers.
Electric Vehicles – Benefit in Kind
The Chancellor confirmed that the existing low Benefit in Kind (BIK) rates for electric vehicles will be extended, providing continued tax relief for businesses and employees who opt for EVs. This initiative encourages the adoption of electric vehicles as a viable and sustainable alternative to traditional combustion engine cars.
The BIK rate for electric vehicles will remain at 2% for the tax year 2025-2026, ensuring that employees who choose electric company cars can benefit from significantly lower tax liabilities compared to their petrol or diesel counterparts.
The appropriate percentage used to calculate an individual’s company car tax for zero emission and electric vehicles will increase for Tax Years 2028-2029 and 2029-2030 by 2 percentage points per year.
If you have any questions on any of the subjects raised in this update, please contact our budget team to find out more.
Follow our updates on the Autumn Budget via our social channels using the hashtag #AutumnBudget2024.
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