Autumn Budget raises employer National Insurance contributions

The Budget delivered on 30 October 2024 raised employer National Insurance contributions (NICs), the single biggest tax raising measure in the statement. The Office for Budget Responsibility (OBR) expects the change to raise £25.7 billion a year by 2029/30, before accounting for the indirect effects of the policy¹.

The changes to employer NICs comprise a 1.2 percentage point rate increase, a reduction in the threshold at which employers begin paying NICs from £9,100 to £5,000 a year, and an increase in the Employment Allowance, the relief smaller employers can claim on their NICs liabilities¹. The Chancellor, Rachel Reeves, said Labour had kept "every single commitment that we made on tax in our manifesto", while the then Opposition leader Rishi Sunak said the Budget "raises tax on working people by increasing National Insurance and breaking Labour's promise"¹. Labour's manifesto said: "Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT." Labour has argued the commitment applied to working people but not employers; the Institute for Fiscal Studies director Paul Johnson said increasing employer NICs would seem to be a "straightforward breach of a manifesto commitment"¹.

The OBR forecasts that approximately three-quarters of the employer NICs will be passed on to employees through lower real wages, reducing the amount raised after indirect effects. It also says this passing-on is partly responsible for what it forecasts will be a "sharp" slowdown in real household disposable income growth in 2026/27 and 2027/28¹.

As a result of the Budget, taxes are set to increase by £40 billion overall¹. The IFS said the Budget will see a 1.21% increase in taxes as a share of GDP by the end of the forecast period, against a 1.45% rise in the Spring Budget of 1993; the OBR told Full Fact that in cash terms the overall tax increase is higher than in 1993, when Norman Lamont raised taxes by £38.5 billion¹.

The OBR forecasts real GDP cumulative growth from 2024 to 2028 of 7.1% under the Budget, down from 7.6% in March's forecast. It forecasts growth of 1.1% this year, up 0.4 percentage points, and 2% in 2025, up 0.1 percentage points, with lower growth from 2026 to 2028: 1.8% in 2026, and 1.5% in both 2027 and 2028¹. The OBR says the Budget's policies "temporarily boost output in the near term, but leave GDP largely unchanged in five years", and that the net economic effect on output "begins to turn positive from 2032-33 onwards"¹.

Why it matters for households

The employer NICs changes take effect from the Budget on 30 October 2024 and are paid by employers, not deducted from employees' payslips directly¹. The OBR forecasts that about three-quarters of the cost will be passed on to employees through lower real wages, and links this to a forecast "sharp" slowdown in real household disposable income growth in 2026/27 and 2027/28¹. The £2 cap on single bus fares in England is replaced with a £3 cap for the whole of 2025¹. The Budget raises taxes by £40 billion overall¹. For background on how contributions work, see National Insurance: classes, rates and what it pays for and National Insurance: self-employed and employees compared; for how Budget measures reach household finances, see Budgets and fiscal statements.

What happens next

The OBR forecasts cover to 2029/30 for the NICs revenue figure and to 2028 for GDP growth, with the net economic effect on output turning positive from 2032-33¹. The £3 bus fare cap applies for the whole of 2025¹. The OBR review of the March 2024 forecast found the Treasury knew in February about pressure on departments' budgets for 2024/25 amounting to £9.5 billion above what was known to the OBR at the time of the Spring Budget, and that "the size of the reserve to meet those pressures was reduced by £3.5 billion"¹.