Meet Kate, Rose and Helen: Worried About Employer NI Increases In The 2024 Budget
Meet Kate, Rose and Helen! These bright young entrepreneurs each run their businesses. However, they have one thing in common.
Following the 2024 Budget, they have all seen several posts on social media that have got them worried about the increases in Employer NI. 😟
⚠ It is increasingly alarming because some of the posts are by Accountancy Firms, with warning about the impact onto inflation!
Over coffee the three of them decided to ask a Financial Management professional for some advice ✅
Kate owns a small sweet factory shop, employing 12 part-time employees on average salaries of £10,000 pa.
Kate’s Employer NI liability in 2024/25 will be £0 because she applied for the Employer NI Allowance of £5,000, which covered the contributions of £1,490.
Kate has only seen posts on social media about the increase in Employer NI rate from 13.8% to 15% and is worried this increase will be mean she will have to start paying contributions.
Rose owns a recruitment agency employing 4 full-time employees on average salaries of £60,000.
Rose’s Employer NI liability in 2024/25 will be £28k and she has applied for the allowance, so the amount is reduced to £23k.
Rose has seen posts that say employers with higher paid employees will be the most effected by the changes.
From what Rose has seen she is worried the cost will go up by 8%.
Helen owns a factory employing 35 employees on average salaries of £30,000.
For 2024/25 Helen’s Employer NI is estimated to be £101k so she cannot claim the allowance (there is a cap of £100k).
Helen’s friends have told her about social media posts, and she saw an example of a factory similar to hers, where the owner mentioned the increases would be £30k.
Helen is worried she will have to put the price of her products up in what is already a competitive market.
They are all worried about their businesses and their employees.
With the increases in Employer NI they are concerned about the uncertainty over being able to give pay rises in 2025/26.
They have all received free information from their Accountants and Payroll companies ✅ which will help them make decisions.
A Closer Look At 2024/25
Kate and Rose were both able to get the allowance of £5,000, reducing the amount payable. Helen was unable to get the allowance because her liability was over £100,000.
The FM professional points out that Kate’s liability of £1,490 is materially different than Rose’s, because of the combination of more employees and lower salaries in Kate’s business. This means more of their salaries are subject to 0% under the threshold of £9,100 than over at 13.8%.
2025/26 Estimations
The FM professional explains😊 Even though rates have increased and the threshold reduced, Kate still has nothing to pay because the allowance has gone up to £10,500. For the same reason Rose will actually pay less than in 2024/25 because the net increase in Liability is lower than the increase of £5,500 in allowance. However, while Helen is facing a large increase in liability as expected, she can now claim the allowance (which she could not in 2024/2025) meaning the increase is cut by over a third.
In Summary
As a result, Kate feels confident enough that she can give her employee a +3% pay rise next year because at £9,540 the liability is still below the allowance. ✅
Rose has also decided to give her employees a +4% pay rise next year which will cost her an additional £1,230 in contributions over 2024/25. ✅
Helen has decided continue exploring with the FM professional how she can mitigate the increased cost through other changes within the business. ✅
Disclaimer
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