Spring Budget – National insurance cuts – what they mean to you as an employer

The national insurance cuts in the Spring Budget have made most of the Budget-related headlines. So, what is the effect of this on you as an employer?

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Your employees benefit

In last year’s autumn statement, employee’s national insurance was cut by 2 percentage points from 12% to 10%. This change went into effect on 6 January 2024.

The Spring Budget extended this further by reducing the employee national insurance contribution by a further 2 percentage points, bringing the rate down to 8% from 6 April 2024.

If you were planning to pay staff bonuses in your March payroll, then there may be some mileage in seeing if staff would like these payments deferred to April so that they benefit from the lower national insurance rate and keep more of the bonus.

No change to employer’s national insurance

This reduction only affects the rate of national insurance paid by employees though. The rate of employer’s national insurance remains unchanged at 13.8% for any wages you pay in excess of £9,100 a year (£175 per week). So for an employer, unfortunately there is no immediate financial benefit from the cut to the employee rate.

Payroll software

As an employer, you will need to be sure that your payroll software is updated for the change in rate prior to 6 April 2024. It is likely that most major providers of payroll software will be ready, but it would be a good idea to check this and that you are running the latest version.

If the payroll is not updated, then you will deduct the wrong amount of national insurance and will need to correct this later, which may not be straightforward.

Employment allowance

As has been the case in recent years, eligible employers can still claim an employment allowance in 2024/25, worth £5,000 per year as a reduction on their total National Insurance liability. Please speak to us if you are not sure how to claim this.

If you need any help with making sure that your payroll software is updated, please feel free to contact us. We will be happy to help you!