The employment sector will see a significant change in taxes, including the increase of both employment allowance and the rate of national insurance contributions.
Recruitment agencies will be responsible for accounting for PAYE on payments made to workers supplied via umbrella companies. In addition to this, the government has announced a £40 million investment to transform the apprenticeship levy into a more flexible growth and skills levy. Find out how these changes will affect employers with staff situated in the UK below.
The rate of employer national insurance contributions (NICs) will increase from 13.8% to 15% from 6 April 2025. The secondary threshold (the amount at which employers start to pay NICs) will be reduced from £9,100 to £5,000 a year from 6 April 2025 until 6 April 2028, and then increased by the consumer price index thereafter.
The Employment Allowance will increase from £5,000 to £10,500, and the £100,000 employer’s NIC threshold for eligibility will be removed from 6 April 2025 increasing its availability to a larger number of employers.
From April 2026, recruitment agencies will be responsible for accounting for PAYE on payments made to workers supplied via umbrella companies. If no agency is involved, this responsibility will fall to the end client business.
The government announced a £40 million investment to transform the apprenticeship levy into a more flexible growth and skills levy.
Employers will have to carry the burden of these proposed changes which could result in reduced recruitment, lower salary increases for existing employees and lower employer contributions to employee pension schemes. There could be an upside to these changes, particularly if employers look to incentivise their staff using non-cash benefits such as approved and unapproved share options.
