October 24 Budget Update

This article will be updated as and when we get more information, and is meant to be a general guide until we can confirm exact changes.

Labour’s first Budget in 14 years was delivered on 30th October 24 by Chancellor Rachel Reeves in parliament.

As ever there is a huge amount of commentary online and in the press about the impacts the changes will have on individuals, families and businesses. 

The main headline is that an additional £40 billion a year will be raised through tax increases to fill a fiscal black hole, and to fund significant increase in investment and capital projects.

We know these budgets are a long read (!), so we have outlined below what we think are the pertinent points for our contractor employees.

Changes to Employer NIC

NASA will be in close contact with our agency partners in the coming months on this point, as we know everyone will want to know exactly what the overall impact of this change might be for them. Although we can't run exact calculations just yet, we have outlined the expected outcome below. 

• The rate of Employer NICs will increase by 1.2 percentage points from 13.8% to 15.0% from April 2025.
• The Secondary Threshold, the point at which Employer NICs becomes due is also being decreased from £9,100 to £5,000 per annum.

These points combined mean that the Employer NIC contributions that NASA make (from the agency assignment pay rate) will increase. We have linked a brief overview of the expected difference here. 

Please be advised there is no immediate change, so payments prior to 6th April 2025 will not be impacted.

The below table shows the difference this will make from April to the amount of Employer NIC NASA will have to pay to HMRC. 

Important note: these are preliminary figures, and subject to change. We have shown this to give a rough guide, but any changes to your rate will be discussed with your agency. 

Increase to National Living Wage / National Minimum Wage

NLW/NMW rates will be increased from 1^st April. 

• The headline National Living Wage will increase from £11.44 to £12.21 per hour for those workers aged over 21.
• The National Living Wage will see a huge relative increase from £8.60 to £10.00 per hour for workers aged between 18-20.

The ‘Minimum Umbrella Rates’ that an umbrella company can accept for a worker will increase proportionately.

You will also see the change reflected in your payslips where the minimum wage part of your pay is summarised. This could affect those making 100% contributions to their private pensions, as more will be allocated to NMW, so if we think this will impact you we will be in touch closer to the time. 

Unfreezing of PAYE thresholds & allowances

In what is considered a slightly surprising move, the Chancellor gave something back by announcing that she will unfreeze the PAYE threshold & tax-free allowances from 2028.

This is where the earning points where the 40% higher and 45% additional rates for PAYE tax become payable have been frozen each year. This is known as ‘fiscal drag’ because over time more people get dragged into the higher and additional rate bandings as their pay increases.

The announcement means the thresholds and tax-free allowance will from 2028 increase in line with inflation and is good news for umbrella contractors, as once unfrozen the starting point for higher and additional rate PAYE will be higher, meaning less people will be dragged into the higher rate tax banding. 

Tackling tax avoidance in the umbrella market

The new government have also moved decisively to act on what they see as a significant area of non-compliance and lost tax revenue.

Building on plans to regulate the umbrella market from the previous government, they will be pressing ahead with legislation to make agencies and end-hirers liable for any unpaid PAYE taxes where a worker is employed by an Umbrella company.

In our view this is a positive move to stamp out non-compliant practices that not only costs the exchequer hundreds of millions each year, but puts hard working contractors at huge risk of fines, penalties and the devastation that comes with the full force of HMRC.

We will work closely with our industry body, the FCSA , alongside other industry stakeholders to ensure this legislation is fit for purpose and provides the protection and reassurance for compliant umbrella companies and their contractor employees first and foremost.

Last updated: 04/11/2024

Updated: 31/10/2024