Key Highlights from the Spring Budget: what it means for employers

Yesterday, the Chancellor of the Exchequer presented the Spring budget. The Office for Budget Responsibility (OBR) has forecast that average earnings will increase in real terms as inflation falls faster than anticipated a few months ago. Therefore, the OBR has revised its growth forecast for 2024 from 0.7% back in November 2023 to 0.8%. Disposable income per person is now expected to increase moderately in real terms, rather than fall further.

The standard rate of employee National Insurance Contributions (NIC) will be reduced by a further 2%. This will take the rate from 10% to 8%, effective from 6^th April 2024. This reduction combined with the cut from last year’s autumn statement, is expected to save the average worker over £900 per year.

A further 2p is also being cut from the main rate of self-employed National Insurance on top of the 1p cut announced at Autumn Statement 2023. This means that from 6 April 2024 the main rate of Class 4 NICs for the self-employed will reduce from 9% to 6%.

Employers will not see the benefit of the NIC reduction, as their rates are staying the same. In view of the previously announced increase in National Minimum and Living Wage rates from 1 April 2024, employers will still be facing an increase in employment costs.

The turnover threshold for VAT registration, which is currently set at £85,000, will be raised to £90,000 from April 2024.

The Government’s loan scheme introduced during the COVID-19 pandemic will be extended for small businesses until March 2026.

High Income Child Benefit Charge

Another measure the government announced was on the High Income Child Benefit Charge. The threshold will increase to £60,000 from 6 April 2024 with a taper up to £80,000. The child benefit becomes fully repayable when the higher earner gets £80,000 per annum.

Additional insights into the UK economy were provided, indicating the OBR’s forecast for economic growth:

A 0.8% growth is anticipated for the UK economy this year, followed by a 1.9% growth next year, 2% in 2026, with subsequent increases of 1.8% in 2027 and 1.7% in 2028.

Inflation is forecast to dip below the Government’s 2% target by the end of June, further declining to 1.5% in 2025.