The long-awaited Budget Day is finally here; the first from the new Labour government and the first ever delivered by a female Chancellor of the Exchequer. Some of the measures in the speech today had already been announced but there were nevertheless some surprises and confirmation that there will be no changes to income tax, employees’ national insurance or VAT.
We have summarise some of the business, taxation and employment related measures in this blog post but you can find more information on everything announced today here https://www.bbc.co.uk/news/articles/cdxl1zd07l1o
National Insurance
We’ve quite often found ourselves starting a blog post discussing national insurance in recent years, and this budget is no exception. This time, however, there is no change to the rate that employees pay so workers shouldn’t see a change in their payslips. But the amount employers pay will be increasing in April – up from 13.8% on salaries above £9,100 to 15% on salaries above £5,000. It is estimated this will raise about £25bn a year.
In an effort to offset this for smaller employers, employment allowance will increase from £5,000 to £10,500.
Carers’ allowance
There has been a lot in the news recently about carers’ allowance and about how carers who inadvertently earn more than permitted have been penalised. The Chancellor announced today that the earnings threshold will increase to £195 per week which means carers can still be eligible for the benefit of around £81 a week even if they increase their working hours. There will also be a review into how overpayments are dealt with.
Wage and pension rates
The National Living Wage – the minimum paid to those over 21 – will increase to £12.21 from April; an increase of 6.7%. For those aged 18-20, the National Minimum Wage will rise to £10 per hour. The rate for apprentices will increase to £7.55 per hour.
The new and basic state pension will increase by 4.1% next year.
Income Tax thresholds
The income tax thresholds – the rate at which people start paying tax or move into higher tax bands – are currently frozen which means that more people pay more tax each year as their wages increase. There was speculation that this freeze would be extended but it was confirmed today that the thresholds will start to rise in line with inflation from 2028.
Other measures
Fuel duty will remain frozen and that freeze will be extended for a further year beyond April 2025.
£500m will be allocated to repair potholes in England and money will be made available for rail infrastructure projects. As a contrast, the cap on single bus fares will rise to £3.
There will be a new tax on vaping liquid and a review into the sugar tax on soft drinks. As is normal in a budget, the duty on tobacco and some alcoholic drinks will increase but will reduce on draught drinks such a beer served in pubs.
So, the first Budget is done and the plans of the new government are starting to become clear. If you need any help or information on what the increase in employers’ national insurance means to your payroll, just get in touch.