2024 National Insurance Changes: Impact on Employers
Significant changes to National Insurance contributions came into effect in 2024, substantially impacting employer costs across the UK. As an employer, understanding these changes is crucial for accurate payroll management and financial planning.
Immediate Impact
These changes are already in effect and will impact your 2024-25 payroll costs and planning.
Key Changes for 2024
1. Employer National Insurance Rate Increase
The most significant change is the increase in employer National Insurance contributions from 13.8% to 15% - an increase of 1.2 percentage points.
Previous Rate
13.8%
New Rate (2024)
15%
2. Lowered Employment Allowance Threshold
The threshold at which businesses become eligible for the Employment Allowance has been reduced from £100,000 to £45,000 of annual employer National Insurance liability.
3. Maintained Employment Allowance Amount
Despite other changes, the Employment Allowance remains at £5,000 per year, which can significantly offset the increased employer costs for eligible businesses.
Financial Impact Examples
Example: Employee earning £35,000 per year
(£35,000 - £12,570) × 13.8% = £3,095
(£35,000 - £12,570) × 15% = £3,365
What This Means for Your Business
1. Increased Employment Costs
For most employers, this represents a significant increase in employment costs. A business with 10 employees earning £30,000 each will see their National Insurance bill increase by approximately £2,100 per year.
2. Budget and Cash Flow Impact
You'll need to factor these increased costs into your budget planning and cash flow forecasting. The impact will be felt monthly through your payroll runs.
3. Recruitment and Hiring Decisions
The true cost of employing someone has increased, which may influence your recruitment strategies and hiring decisions going forward.
Planning Strategies
1. Review Your Employment Allowance Eligibility
With the lowered threshold, fewer businesses will qualify for the Employment Allowance. Check if you're still eligible and factor this into your calculations.
2. Consider Alternative Employment Structures
Some businesses may benefit from reviewing their employment structures, though any changes should be carefully considered from legal, tax, and commercial perspectives.
3. Update Financial Projections
Ensure your 2024-25 financial projections account for these increased costs. This will help with pricing decisions and business planning.
4. Review Payroll Processes
Ensure your payroll systems are correctly applying the new rates and that you're maintaining accurate records for HMRC reporting.
Caroline's Practical Advice
"Update your payroll software immediately to ensure the correct rates are being applied. Review your monthly cash flow to account for the increased costs, and consider whether you need to adjust your pricing or employment strategies in response."
Employment Allowance - Key Points
Additional Considerations
Impact on Different Business Sizes
Timing Considerations
These changes apply to the current tax year, so the impact on your business finances is immediate. Factor this into quarterly reviews and year-end planning.
How We Can Support Your Business
Our payroll services can help you navigate these changes: