Martin Lewis sends out National Insurance warning after Budget 2024

Martin Lewis has sounded the alarm on National Insurance following the Budget, warning that ordinary people may feel the ripple effects. Although the National Insurance hike for employers won't directly impact employees, the money expert warns it could have a "knock-on effect".

Breaking down the Autumn 2024 Budget on X, Lewis explained that the changes would increase costs for firms by £615 per worker annually. Chancellor Rachel Reeves announced that employer contributions would rise from 13.8% to 15% on earnings above £175 from April 2025.

Additionally, the threshold for employer tax payments on employee salaries will decrease from £9,100 to £5,000 per year. Lewis, founder of Money Saving Expert, elaborated: "The big change, the big announcement making a lot of money for the revenue is there's going to be an increase on the National Insurance cost to employers.

"National insurance [that] employees pay went down two percent in the last couple of years. Instead of putting that up, it's basically been shifted onto employers. So the rate of National Insurance that employers pay is going up from 13.8 to 15% and crucially they will start paying that on an employee earnings of just £5,000 a year rather than £9,100 a year as they do right now. So that's a big hit to many employers," reports the Express.

However, he emphasised that "smaller employers will see an increase in the allowance they get so now won't have to pay National Insurance on their first £10,500 a year". He suggested this would be highly advantageous for these businesses.

Following the unveiling of the new changes this afternoon, the finance expert further pointed out: "Currently, an employer starts paying 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."

He went on to explain how consumers and workers could be impacted by this, stating that "something is going to have to pay for that". He added "it will either come out of the company profits, increased cost to consumers or reduced salary and benefits in future for employees. So whilst it's not a direct cost to consumers, it probably will have some knock-on affect on consumers and workers in the future."

His comments were made as Reeves presented the first Labour Budget in 14 years at the House of Commons today. The Chancellor confirmed that employers' national insurance contributions (NICs) will rise.

She cautioned about higher rates and a lower starting threshold, which would raise £25.7 billion by 2029-30. The rate will rise by 1.2 percentage points to 15% from April 2025, and the threshold for when employees start making payments will be lowered to £5,000 from the current £9,100, MPs were informed.

Acknowledging the impact of these changes, she conceded: "I know that this is a difficult choice. I do not take this decision lightly." However, the Conservatives remain sceptical.

OutgoingTory leader Rishi Sunak levelled criticism at Ms Reeves, claiming she was "fiddling the figures" in her Budget by altering the debt target, and argued: "The reason the Chancellor has increased borrowing and increased taxes is because she has totally failed to grip public spending."

Adding to the critique, Paul Johnson, director of the Institute for Fiscal Studies, suggested the Budget would only offer a "short-term sugar rush" to the economy, fuelled by "debt-financed spending splurge". He also warned that "somebody will pay for the higher taxes largely working people".