Industry Updates Coming in April 2025 (Autumn Budget)

Labour’s first Budget in 14 years was delivered by Chancellor Rachel Reeves in parliament back in October, and as a result the Umbrella sector can expect some changes in 2025.

📊 Changes to Employer NIC

The most notable change for umbrella companies and their workers, is the change in Employer National Insurance.

• 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. 

NASA retains our Employer NIC from the contract income we get from your agency / client, so the amount of Employer National Insurance we retain will increase. Unless we have informed you otherwise, we do not expect the rate that we receive from your agency to change. 

The below table shows the difference this will make from April to the amount of Employer NIC NASA will have to pay to HMRC. This change will be reflected and shown on your NASA payslips. 

🙋 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 which is based on the NLW + holiday pay + employment costs. 

This change will also be reflected on NASA payslips where the minimum wage part of the overall pay is summarised. This could affect those making 100% contributions to their private pensions, as more will be allocated to NMW. 

✅ 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.

If you have any questions we'd recommend getting in touch with our sales team. They will get you in touch with your Account Manager, who will be able to discuss the changes specifically.

📧 sales@nasagroup.co.uk

📞 01179297683 - Option 1 

Last updated: 05/03/2025

Created: 31/10/2024