Martin Lewis issues National Insurance Budget warning to workers

Martin Lewis has issued a stark warning about National Insurance in the wake of the Budget, cautioning that the average person may feel its effects. While the increase in National Insurance for employers won't have a direct impact on employees, the financial guru suggests there could be significant "knock-on effect".

Analysing the Autumn 2024 Budget on X, Lewis pointed out that the changes will mean an additional cost of £615 per employee each year for businesses. Chancellor Rachel Reeves has declared that employer contributions will go up from 13.8% to 15% on earnings over £175 starting April 2025.

Moreover, the threshold for when employers start paying tax on employee wages is set to drop from £9,100 to £5,000 annually. The founder of Money Saving Expert said: "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," as reported by the Express.

However, he highlighted 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 beneficial for these businesses.

After the announcement of the new changes this afternoon, the finance expert further noted: "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 continued to explain how consumers and workers could be affected 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 warned 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. Recognising the effects of these changes, she admitted: "I know that this is a difficult choice. I do not take this decision lightly."

Nevertheless, the Conservatives remain unconvinced. Rishi Sunak, the outgoing Tory leader, criticised Ms Reeves, accusing her of "fiddling the figures" in her Budget by changing 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."

Furthermore, Paul Johnson, director of the Institute for Fiscal Studies, claimed the Budget would only provide a "short-term sugar rush" to the economy, driven by a "debt-financed spending splurge". He also cautioned that "somebody will pay for the higher taxes largely working people."