The Spring Statement 2025: National Insurance & National Minimum Wage

Entrepreneurs and business owners will always be rightly concerned about the implications of any tax measurers or changes introduced by the Chancellor. With this in mind, in this article we take a look at the recent changes to National Insurance contributions, the National Living Wage and National Minimum Wage, and other tax measures. 

National Insurance Contributions

Employees and employers

The employer rate will increase from 13.8% to 15% from 6 April 2025. The main rate of Class 1 employee National Insurance contributions (NICs) is 8%.

The Secondary Threshold is the point at which employers become liable to pay NICs on an individual employee’s earnings and is currently set at £9,100 a year. The government will reduce the Secondary Threshold to £5,000 a year from 6 April 2025 until 6 April 2028 and then increase it by Consumer Price Index (CPI) thereafter.

The Employment Allowance currently allows businesses with employer NICs bills of £100,000 or less in the previous tax year to deduct £5,000 from their employer NICs bill. From 6 April 2025 the government will increase the Employment Allowance from £5,000 to £10,500 and remove the £100,000 threshold for eligibility, expanding this to all eligible employers with employer NIC bills.

The self-employed and NICs

From 6 April 2025 the rates of Class 4 self-employed NICs are 6% and 2%. For Class 2 NICs from 6 April 2025:

• Self-employed people with profits of £6,845 and above get access to contributory benefits, including the State Pension, through a National Insurance credit, without paying Class 2 NICs
• Those with profits under £6,845 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension will continue to be able to do so.

For those paying voluntarily, the government will also increase Class 2 and Class 3 NICs to £3.50 and £17.75 respectively for 2025/26.

National Living Wage and National Minimum Wage

The government has confirmed increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) with effect from 1 April 2025. The rates which will apply are as follows:

The apprenticeship rate applies to apprentices under 19 or 19 and over in the first year of apprenticeship. The NLW applies to those aged 21 and over.

 Over time, the government intends to create a single adult wage rate.  From April 2025, the National Minimum Wage for 18-20 year olds will be £10.00 per hour, an increase of 16.3%, the largest ever increase in both cash and percentage terms. This means a boost to annual earnings of over £2,500 for nearly 200,000 young people across the UK.

Other Business Measures

The VAT registration threshold

From 1 April 2025, the VAT registration threshold remains at £90,000 and the deregistration threshold at £88,000.

Company vehicles

The rates of tax for company cars are amended for 2025/26: 

• The charge for zero emission cars rises from 2% to 3%
• The charge for other cars increases by 1%
• The maximum benefit of 37% remains.

The government has confirmed increases to the benefit in kind rates for company cars for tax years up to and including 2029/30.

Car fuel benefit charge

The car fuel benefit charge is £28,200 from 6 April 2025.

Company vans

The van benefit charge is £4,020 and the van fuel benefit charge is £769 from 6 April 2025.

Treatment of double cab pick-up vehicles

The government have confirmed double cab pick-up vehicles (DCPUs) with a payload of one ton or more will be treated as company cars for certain tax purposes.  This will have a significant effect on the income tax liability of individual taxpayers who drive employer provided DCPUs.

From 1 April 2025 for Corporation Tax, and 6 April 2025 for Income Tax, DCPUs will be treated as cars for the purposes of capital allowances, benefits in kind and some deductions from business profits.

The existing capital allowances treatment will apply to those who purchase DCPUs before April 2025. Transitional benefit in kind arrangements will apply for employers that have purchased, leased, or ordered a DCPU before 6 April 2025. They will be able to use the previous treatment, until the earlier of disposal, lease expiry, or 5 April 2029.

In our next article in this series, we will be looking at how the recent Spring Statement may have affected Non-Doms and Resident Foreigners.  As always, please contact us to discuss your circumstances with you.

These articles have been written to provide a general guide to potentially highly complex issues. Whilst great care has been taken in the production of these articles, they are intended to provide the clients and friends of Ritchie Phillips LLP with an outline of the issues individuals, families and trustees should consider and you should seek specific advice before taking or refraining from any action.