Martin Lewis’s instant budget reaction – National Insurance, minimum wage and stamp duty
Increase on National Insurance cost to employers
The Chancellor announced that the rate of employers’ national insurance (NI) will rise by 1.2 percentage points, from 13.8% to 15% from April next year and the secondary threshold – meaning the level at which employers start paying the tax on each employee’s salary – will also be reduced from £9,100 a year to £5,000.
The Money Saving Expert said: ‘That is a big hit to many employers, although smaller employers will see an increase in the allowance they get so they now won’t have to pay National Insurance on their first £10,500 a year, which will save many smaller employers.
‘Currently, you start paying as an employer National Insurance at £9,100. If you drop that to £5,000 at a 15% rate, just on that difference alone that’s £615 more a year per employee.
‘Something is going to have to pay for that – it’ll either come out of company’s profits, increased costs to consumers, or reduced salary and benefits in future for employees.
‘So, while it is not a direct cost on consumers it probably will have some knock-on effects on consumers and workers in the future.’
Minimum wage is going up next April
The minimum wage will rise to £12.21 an hour next year after the Chancellor confirmed a 6.7% increase.
The increase, recommended by the Low Pay Commission, will mean an extra £1,400 a year for a full-time worker earning the main minimum wage rate, known as the national living wage, from April 2025.
But it still falls short of the £12.60 per hour UK living wage calculated by the Living Wage Foundation.
The Chancellor also announced that the minimum wage for people aged 18-20 would rise to £10 an hour, an increase of £1.40.
Martin warned workers on the minimum wage to ‘make sure this happens next April’.
He continued: ‘Some employers don’t do it automatically. That falls foul of the law, but sometimes it doesn’t happen.’
Stamp duty
Rachel Reeves announced the Government would increase the Stamp Duty Land Tax payable on second homes and buy-to-let from 3% to 5% from Thursday in a move experts have warned will send demand from property investors slumping.
First time buyers were also hit hard by Ms Reeves’ decision not to extend the relief for those buying their first home, which had been set at £425,000 on a temporary basis in 2022.
This means that from March 31 next year, the nil rate band will revert back to £125,000, meaning an extra 20% of first time buyers will have to pay more in stamp duty, according to experts.
Martin said: ‘In the Budget, it was announced that if you’re buying a second home, the extra stamp duty you pay on top of the normal stamp duty is rising from 3% to 5%.
‘So, from tomorrow that happens – anyone buying a second home is going to pay much more stamp duty.
‘But what wasn’t mentioned but is in the documentation, is the thresholds on when you start paying stamp duty were due to drop next April and that is being continued.
‘So, from April next year, you will start paying stamp duty on a property that costs £125,000 or more. Currently it’s £250,000 or more. So, a lot more people will be paying stamp duty.
‘If you’re a first-time buyer you will be paying stamp duty on a property that costs £300,000 or more. Currently it’s £435,000 or more. So, a big change to stamp duty there.’
