National Insurance Contributions (NIC)
The new Labour government promised to not increase tax/NIC for “working people”. In fairness, tax/NIC rates for the employed and self-employed remained untouched, and in fact it was announced that the current freezing of the thresholds would stop from April 2028 and they would be then increased with inflation.
Employers however did not get off so lightly. The rate of employers NIC is currently 13.8% and is charged to the employer on salaries above a £9,100 threshold. From 6 April 2025, the rate of employers NIC will increase by 1.2% to 15% and in addition, the threshold on each salary at which this rate is charged will be reduced to £5,000.
These two changes combined are likely to be costly for a lot of employers. The reduction of the threshold alone will cost employers £615 for each member of staff paid over £9,100. There will then be the 1.2% employers NIC increase on all salaries above this point too.
To soften the blow for smaller employers, the “employment allowance” which currently exempts the first £5,000 of employers NIC, will be increased to £10,500.
Income Tax Rates
No changes were announced with regards to income tax directly, other than the thresholds will increase with inflation from April 2028.
Next year we will therefore have the same £12,570 tax free personal allowance, basic rate tax band (20%) to £50,270, higher rate tax band (40%) to £125,140 and additional rate tax band (45%) thereafter, as we have had in recent years.
The tax-free personal allowance continues to be tapered between £100,000 and £125,140.
Tax rates on dividends were also untouched, despite arguably not being “working people” who pay these rates.
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