UK Budget 2024 – Blog 5 – Employment Taxes

For employees

As announced in the UK Government Autumn Statement 2023 and in effect since 6 January 2024, the main rate of Class 1 National Insurance Contributions (NICs) has already reduced from 12% to 10%.

In the UK Budget 2024, the Chancellor cut this by a further 2 percentage points to 8%, taking effect from 6 April 2024.

For 2024/2025, this combined 4% reduction will apply to your annual earnings between £12,570 and £50,270. The NIC rate on your earnings above £50,270 a year remains at 2%.

So what?

This combined NIC reduction means that someone with employment income of, say, £50,000 will pay £1,497 less NICs in 2024/25 than if the rate had remained at 12%. Or, to look at it another way, their monthly pay packet will increase by almost £125.

For employers

There have been no changes to the rate or thresholds for employer’s Class 1 NICs, which remains at 13.8% for wages paid in excess of £9,100 a year (£175 per week).

For eligible employers, the employment allowance remains at £5,000 per year, reducing their total employer’s NIC liability by this sum.

Benefits in kind

Employees are required to pay income tax on certain non-cash benefits. For example, the provision of a company car constitutes a taxable ‘benefit in kind’. Employers also pay Class 1A NIC at 13.8% on the value of benefits.

The set percentages used to calculate company car benefits are fixed until 5 April 2026 before slight increases apply to most car types, including electronic and ultra-low emission from 6 April 2026.

The figures used to calculate benefits-in-kind on employer-provided vans, van fuel (for private journeys in company vans), and car fuel (for private journeys in company cars) remain fixed at their 2023/2024 levels in 2024/2025. These are:

• Van benefit £3,960
• Van fuel benefit £757
• Car fuel benefit multiplier £27,800

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.