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National Minimum Wage and Employment Taxes

21 January 2025

National Living Wage (NLW)/National Minimum Wage (NMW)

 The table below shows the increase in National Living Wage/National Minimum Wages proposed in the Autumn Budget

  • National Minimum wage paid to Apprentices, Under 18s and 18 to 20-year-olds.
  • National Living wage is paid to anyone over 21.

 

Approx increase in Gross pay per annum based on hours worked per week

Age GroupBefore April 2025After April 2025Increases10 hours per Week20 hours per week30 hours per week
Apprentice£6.40 per hour£7.55 per hour18%
£598£1196£1794
Under 18£6.40 per hour£7.55 per hour18%£595£1196£1794
18 to 20£8.60 per hour£10.00 per hour16.3%£728£1456£2184
21 & over£11.44 per hour£12.21 per hour6.7%£400£801£1201

When calculating Agricultural wages there are some additional factors to consider – see the Scottish Government’s website on Agricultural Wages.

Employment Taxes

If you have employees in your business, you must deduct certain payments from your employees' gross pay, and then make those necessary contributions to HMRC.

Both the Autumn Budget in November and the Scottish Budget in December have outlined changes which will impact both employers and employees over the next few years.

There are many deductions that can be facilitated at payroll level but the main ones here are –

  • Employers National Insurance Contributions (Employers NIC).
  • Income Tax
  • Employers and Employees Pension contributions

 

Employers National Insurance Contributions (Employers NIC)

Before April 2025After April 2025Impact
Employers Class 1 NIC Rate (the percentage rate at which contributions are made on employees)13.8%15%An increase of 1.2p paid for every £1 over the threshold
Employers NIC Class 1 Secondary Threshold (any earnings above this limit are liable to Employers NIC Contributions)£9,100£5,000At the increased rate of 15% this will cost an additional £615 if paid more than £9100 per annum
Employment Allowance (allows eligible employers to reduce their NI liability)£5,000£10,500Could reduce your Employers NI Liability by an additional £5500 if Employment allowance is already being used.

 

The Autumn Budget announced that the employment allowance will rise from £5,000 to £10,500 from April 2025. Some businesses could find themselves paying less Employers NIC if they can utilise the increase in Employment allowance.  Under the existing rules, the employment allowance is only available to employees with an annual NIC liability of less than £100,000.  From April 2025 this threshold is being removed, which means more employers will be able to benefit.

The table below shows the combined post budget increase of wage rates and Employers NIC for an employee working 25 hours per week on National Living wage.

 

Based on NLW @25 hours per weekGross Pay - weeklyEmployers NI Contributions - weeklyIncrease per weekIncrease per annum
Pre Budget£286£15.32£35.50£1,835.44
Post Budget£305.25£31.36

 

 

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Income Tax Changes

Income Tax is a partially devolved matter. The Scottish Government have the power to set income tax rates and thresholds, which they have done.

The Scottish Budget proposed the following changes to Starter, Basic and Intermediate tax thresholds. This will be a small impact on the amount of tax paid through Self-Assessment and PAYE but will require an administrative change for employers with PAYE.

 

Tax BandTax RateThreshold before April 2025Threshold after April 2025
Personal Allowance remains unchanged£12,570£12,570
Starter Rate
19%£12,571 to £14,876£12,571 to £15,397
Basic Rate20%£14,877 to £26,561£15,398 to £27,491
Intermediate Rate21%£26,562 to £43,662£27,492 to £43,662
Higher Rate42%£43,663 to £75,000No change
Advanced Rate45%£75,001 to £125,140No change
Top Rate48%Above £125,140No change

 

Pensions

Employers Pension contributions and the Automatic Enrolment criteria remained unchanged in both the Autumn and Scottish Budgets.

Currently anyone over the age of 22 who is earning more than £10000 per year (£192 per week or £833 per month) qualifies for a workplace pension.

The standard minimum contribution is 8% - usually consisting of:

  • 5% from Employee wages (4% from employee and 1% government tax relief)
  • 3% from Employer
  • Applied on anything earned between £6240 and £50,270

Voluntary enrolment is possible for some people who do not meet the above criteria -see HM Government’s MoneyHelper website for more information.

Becka Henderson, SAC Consulting

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