Increase in Employer National Insurance contributions to 15% and bringing pensions into Inheritance Tax (IHT).
The government has placed the majority of the tax burden on employers, with a £25 billion increase in Employer National Insurance and some respite for smaller businesses. A reduction in the threshold at which Employer National Insurance becomes payable, falling from £9,100 to £5,000 of annual earnings, will cost businesses £615 per employee per year from April 2025, in addition to the 1.2% increase in the headline rate from 13.8% to 15%. It is inevitable that most businesses will pass this cost on to their customers through increased prices or their employees through reduced future reward increases.
Ironically, after all the speculation over pension tax relief, this change will make pension salary exchange and other tax-efficient benefit options even more attractive to employers.
The Chancellor also announced that unused pension funds will fall into the estate for Inheritance Tax purposes after April 2027, restoring the principles that existed prior to the introduction of pension freedoms in 2015. HMRC are now consulting on the details, and whilst there are some anomalies in the current regime, we hope that the final position does not result in a wider impact on this valuable aspect of pension saving with a knock-on erosion of confidence in retirement planning.
In closing, as the government proceeds with these reforms, we’re prepared to guide our clients through the implications. Our expertise can help ensure that amid regulatory changes, businesses maintain a sustainable approach to supporting their workforce and financial goals.
