As we dawn on a new month – the changes to the budget and tax year draw closer! The new tax changes come into force from 6th April 2025, many businesses are calculating the impact and considering their options.
When the government announced their Autumn budget in October 2024 there was trepidation. Although it was hailed as a “no tax increase” budget – scepticism proved right as underlying freezes to tax thresholds will have a significant impact on small to medium-sized businesses and of course to those working in minimum wage and part time positions.
The Government’s commitment to “ fix the foundations” has resulted in a number of changes. The focus here is on the planned changes from April 2025 the NI was have the following impact
1. The rate of employers NI that is increasing to 15%
2. The thresholds for when NI commences is frozen
What this means to smaller businesses and individuals on that low income or part time workers will now reach the NI threshold earlier creating an increases NI liability to both them AND to employers alike. Employers are likely to see as much as a 25% increase in their base running costs (as an example for an employee earning £30,000 a year)
Employers are now rethinking their costs bases, pay increases and other resource spending to accommodate this increase. This of course will have an effect on growth plans and investment. In addition, businesses that rely heavily on part time workers will be the most effected with the impact of both the lowering of the NI threshold and increased rate charge. Staff that once weren’t impacted by NI, now will be meaning employers may rethink their recruitment and resourcing structures.
One solution is to use a third party independent resource such as a fractional finance/operations or a contractor to cover their resourcing needs. What this means is that they pay the third party resource for services rather than increasing staff hours or recruiting which allows them to have the third party bare the expense of the associated tax and NI. Third party resourcing can come at a cost, which would naturally be higher than an internal resource however, with the flexibility of this resource, businesses can increase or decrease as needed taking the strain out of the profit and loss and easing the tax and NI burden.
With the forth coming NI Changes would you consider a flexible fractional resource?
Sources: Autumn budget 2024 (Autumn Budget 2024 – HC 295), The Time New national insurance contributions in 2025 - Times Money Mentor
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