The Government presented this year’s Spring Budget on Wednesday. Key developments of interest to employers include the further 2% cut in employee National Insurance contributions, changes to childcare assistance for working parents and proposed changes to defined contribution workplace pensions.
Compared to last year’s Spring Budget and Autumn Statement, which saw the introduction of the £2.5bn ‘Back to Work Plan’, this year’s Spring Budget provides less food for thought for employers and employment lawyers. The Government has reiterated the policies and proposals announced last year, highlighting its plans to support the long-term sick and disabled into employment, as well as welfare recipients and people over 50.
In this article we summarise the headline proposals that will impact employers and the timescale for the changes.
National Insurance cuts
From 6 April 2024, the government will cut the main rate of Class 1 employees National Insurance Contributions (NICs) by 2p in the pound – bringing it from 10% to 8%. This builds on the NICs cuts announced in the Autumn Statement 2023 (see further information in our article on Autumn Statement: key employment & immigration announcements here), which saw the reduction of the main rate from 12% to 10% from 6 January 2024.
In relation to self-employed people, the Government is also decreasing the main rate of National Insurance by 2p. This is in addition to the 1p cut announced at the 2023 Autumn Statement. At the Autumn Statement 2023, the government announced the removal of the requirement to pay Class 2 NICs from 6 April 2024 and committed to abolishing Class 2 entirely. In the Spring Budget the Government stated it will consult later in 2024 on how it will deliver on this commitment.
Childcare assistance for working parents
Two developments in this year’s Budget are of particular significance for employers:
- The launch of free childcare for parents of two-year-olds
- Increase to the High Income Child Benefit Charge (HICBC) threshold
At last year’s Spring Budget, the government announced an expansion of childcare support in England (see further information here). The first stage of this will be rolled out in April 2024, when eligible working parents of two-year-olds will be entitled to 15 hours of free childcare a week for 38 weeks a year. This will assist with removing barriers to parents working.
In relation to the HICBC, the Government, from April 2024, will raise the threshold from £50,000 to £60,000, and thereby reduce the number of people paying the charge. The rate at which the HICBC is charged will be halved so that Child Benefit will not be withdrawn in full until individuals earn £80,000 or more.
Additionally, the Government aims to begin administering the HICBC on a household rather than individual basis by April 2026, to relieve the clear disadvantage currently suffered by single-earner households, and plans to launch a consultation on this ‘in due course’.
Pension reforms
The Government stated that it intends to bring forward requirements for defined contribution (DC) pension schemes to publicly disclose the breakdown of their asset allocations in order to improve data on current holdings. The proposals will require schemes to compare their performance, costs and other metrics against those of at least two schemes managing over £10bn in assets. This will allow employers and employees to better evaluate each scheme.
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