The government’s Autumn Budget was revealed yesterday, announcing changes to the National Living Wage, National Minimal Wage and employers’ national insurance.
National Living Wage and National Minimal Wage increase
The government will be implementing recommendations from the Low Pay Commission that both the National Living Wage (“NLW”), applicable to those 21 years old and over and the National Minimum Wage (“NMW”), for those under 21 years old, should increase from 1 April 2025.
The NLW is set to increase by 6.7% to £12.21 and the accommodation offset rate, which is a deduction for employers providing accommodation, will also rise by 6.7% to £10.66 per day.
The rates which will apply from 1 April 2025 are:
| New NMW Rate | Current NMW Rate | Increased by (£) | % increase | |
| NLW (21 Years Old and Over) | £12.21 | £11.44 | £0.77 | 6.7 |
| 18-20 Year Old Rate | £10.00 | £8.60 | £1.40 | 16.3 |
| 16-17 Year Old Rate | £7.55 | £6.40 | £1.15 | 18.0 |
| Apprentice Rate | £7.55 | £6.40 | £1.15 | 18.0 |
| Daily Accommodation Offset | £10.66 | £9.99 | £0.67 | 6.7 |
An employee on the current NLW who is working on average 37.5 hours per week has a basic salary of £22,308. In real terms, the rate increase means this will rise to £23,809.50 – an additional £1,501.50 per year.
Employers’ national insurance threshold decrease and rate increase
Employers’ national insurance rates are also set to increase by 1.2% to 15% on a worker’s earnings above £175 from 6 April next year. National insurance paid by employees will not be rising.
The threshold at which employers pay the contributions will be simultaneously decreasing from £9,100 per year to £5,000 (“Secondary Threshold”).
However, the amount the eligible employers can claim back from their National Insurance bill under their Employers Allowance will be more than doubling from £5,000 to £10,500.
The current eligibility criteria for the Employers Allowance are that you must:
- be registered with HMRC as an employer
- be a charity or business with documented employees
- have employers’ Class 1 National Insurance liabilities of less than £100,000 for the previous tax year
- have two or more directors who earn more than the Secondary Threshold (if you’re a limited company employing only directors)
In addition, the above £100,000 eligibility threshold is due to be scrapped. The details are unclear at present as they will be shaped by the introduction of additional legislation in due course.
Impact on businesses
Employers, particularly SMEs and businesses with tight margins, will be reviewing and adjusting their budgets and financial forecasting.
Some may be considering lowering profit margins to reduce corporation tax, freezing recruitment, pausing pay rises and restructuring / redundancies.
We work with employers to understand their businesses and provide commercially and legally sound employment and HR advice. Contact us today to discuss how we can help you navigate these upcoming changes.
Email: hello@peachlaw.co.uk
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Call: 0161 478 3800
