Yesterday the Chancellor Rachel Reeves unveiled the first Budget from a Labour government in a decade and a half. What did we learn about the government’s proposals, and more specifically, how will it affect our industry?
Employer’s NI
The headline news is the increase in Employers’ National Insurance contributions – from 13.8% to 15%. The per-employee threshold at which employers start to pay National Insurance will be reduced from £9,100 per year to £5,000 per year. These changes will apply from 6 April 2025.
The Umbrella minimum rate will therefore also increase in April, and we’ll be communicating out our new rates towards the end of the year in anticipation of this.
National Minimum Wage
The legal minimum wage for over-21s is set to rise from £11.44 to £12.21 per hour from April. Furthermore, the rate for 18-20 year olds to increase from £8.60 to £10, as part of a long-term plan to more towards a ‘single adult rate.
Recruitment Agencies Made Liable for PAYE
The government say they’re committed to taking stronger action on the ‘most egregious tax fraud, including by expanding HMRC’s criminal investigation work and legislating to prevent abuse in non-compliant umbrella companies’[1].
To do this, they will tackle non-compliance in Umbrella companies by moving PAYE obligations to recruitment agencies or, where an agency is not present, end client businesses from April 2026. This is huge – from the proposals, it’s looking like the agency will be liable for any PAYE shortfall that a non-compliant Umbrella company fails to pay. We’ll await to hear further details on this.
Our take on this? A welcome approach for recruitment businesses to take the opportunity to look at their supply chain, tighten up if required, and ensure they are using compliant Umbrella models.
Some other points to takeaway:
Rates of income tax and National Insurance (NI) paid by employees, and of VAT, to remain unchanged.
Income tax band thresholds to rise in line with inflation after 2028, preventing more people being dragged into higher bands as wages rise.
Inheritance tax threshold freeze extended by further two years to 2030, with unspent pension pots also subject to the tax from 2027.
Main rate of corporation tax, paid by businesses on taxable profits over £250,000, to stay at 25% until next election.
Non-dom’ status: ‘Non-dom’ status to be abolished from the tax system from April 2025.
Capital Gains Tax: Rise to the lower rate of CGT from 10% to 18% and the higher rate from 20% to 24%.
We will keep updates coming as and when we hear them, but for now, we advise starting to look at Employer NIC calculations ahead of April and as ever, ensuring that your supply chain is watertight. For any advice we’re always ready to help.
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