How do the budget changes affect your small business?
Over 15,000 employers have signed up to the Real Living Wage meaning one in nine employees now work for a Living Wage Employer. It has seen a great improvement in the ability to recruit staff.
Employer’s NI will be going up - for some.
A 1.2% increase in employers NI will kick in from April 2025. However, this has been somewhat counterbalanced by the increase in Employment Allowance.
This actually means over 865,000 employers will not pay any NI next year.
What does it mean and how can I work it out?
Employers can currently claim relief on up to £5,000 of NI contributions per year. So if your total Employers NI bill is less than this, then it’s totally covered. However, if it is more than this, then you pay the amount of the bill over the £5,000 mark.
If you use payroll software, or an accountant, this should be done for you, but do please check! It can make a big difference to your costs.
The new Labour Government are increasing the Employment Allowance to £10,500 which means that any NI up to this amount does not need to be paid. This helps to counterbalance the increased NI contributions for small businesses.
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Increases to National Living Wage
This will go up to £12.21 per hour for those aged 21 and over, which will affect many employers. However, we have been aware for some time of the pending increases and hopefully are planning for such eventualities in our budgets.
Some employers will struggle to find the additional revenue though, as the raising of wages not only raises a wage, but also increases pension contributions and employers NI contributions.
If you are struggling with how you might afford this, please get in touch before considering losing staff. There are often other ways to manage the situation before it comes to redundancy. Sometimes as a small business owner, it can be hard to see clearly when there are financial constraints.
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Increased costs for employees
Employees, although potentially receiving an increase if paid the living wage, will also see increased costs.
The bus fare cap will rise by £1 per fare. This can get costly when you travel daily, making it £3 per journey. It is also often cheaper to buy two one way tickets than one return. Parents with children that get the bus will also be affected by this increase. I sometimes put 5 kids on a 10 minute bus journey which will now cost £15, instead of £10. Imagine doing that 5 days a week!
Income tax and NI remains frozen so employees will not see the benefit of tax relief again this year.
Smokers will see further tax hikes, as will those smoking vapes.
Car taxes will increase for most vehicles.
If you are a Real Living Wage Employer then rates will go up to £12.60 per hour, or £13.85 in London. The rate for next year in Oxford is not yet announced but expected to be £13.16 per hour, based on it being 95% of the London Living Wage.
Remember the changes don’t take effect until April. If you are concerned, there is time to consult on how to recover additional costs, as well as become a more efficient business.
Just reach out.
