The recent Spring Budget has been dominated by discussions surrounding the cuts to national insurance. What does this mean for you as an employer?
Employees stand to gain from these adjustments. Following last year’s Autumn Statement, there was a 2-percentage-point reduction in employee national insurance, dropping from 12% to 10%, which took effect on 6 January 2024. Now, the Spring Budget has taken it a step further, further cutting the employee national insurance contribution by an additional 2 percentage points, lowering the rate to 8% from 6 April 2024.
If you had plans to issue staff bonuses in your March payroll, it might be worth considering deferring these payments to April. This way, your employees can take advantage of the lower national insurance rate, allowing them to retain more of their bonuses.
However, it’s essential to note that these changes only relate to the rate of national insurance paid by employees. There’s no alteration to the employer’s national insurance rate, which remains steady at 13.8% for wages exceeding £9,100 annually (£175 per week). Unfortunately for employers, there’s no immediate financial gain from the reduction in the employee rate.
Ensuring your payroll software is updated for the rate change before 6 April 2024, is crucial. While most major providers of payroll software are likely to be prepared, it’s advisable to verify this and ensure they are running the latest version. Failing to update the payroll software may result in incorrect national insurance deductions, requiring corrections later, which could prove to be a complicated process.
Additionally, eligible employers can still claim the employment allowance in 2024/25, offering a reduction of £5,000 per year on their total National Insurance liability. If you’re unsure about how to claim this allowance, or need assistance with Payroll and supporting software, please don’t hesitate to reach out to a member of the CB Reid team for help.