Yesterday, Chancellor Rachel Reeves' budget announcement outlined significant developments that will affect both the umbrella and recruitment sectors, as well as broader economic processes, all aimed at promoting fairness and compliance.
Minimum Wage Increases: An increase to the National Minimum Wage to take effect from April 2025:
National Living Wage (for those aged 21 and over): Set to rise to £12.21, an increase of 77p.
18–20-year-old rate: Increasing to £10, up by £1.40.
16–17-year-old rate and Apprentices: Rising to £7.55, an increase of £1.15.
Tax Rates and Personal Allowances: It was confirmed that there will be no increases to the basic, higher, or additional rates of Income Tax, National Insurance, or VAT for working individuals. In 2028/29, personal tax thresholds that were previously frozen by the Conservative government will be adjusted in line with inflation, potentially offering relief to taxpayers.
Class 1 Employer’s National Insurance will increase from 13.8% to 15%, while the secondary threshold will be lowered from £9,100 to £5,000, both taking effect on April 6, 2025. This change will prompt employers to reevaluate their financial planning, as they will be significantly affected by these adjustments.
Employment Allowance: The Employment Allowance will increase from £5,000 to £10,500 starting in April 2025, and the previous eligibility threshold of £100,000 will be eliminated. This change will benefit more employers by alleviating the financial pressure associated with National Insurance contributions.
Umbrella Companies: Starting in April 2026, recruitment agencies will have to handle PAYE (Pay As You Earn) for workers that are supplied through umbrella companies. If there is no agency in the chain, then the end client will be responsible. This change is being implemented to tackle tax fraud and non-compliance in the umbrella sector and to protect workers from surprise tax bills. The government is taking these steps to help prevent tax avoidance and fraud in this area.
Compliance: A COVID Corruption Officer will be appointed to focus on recovering public funds that companies obtained by exploiting government schemes during the pandemic. Additionally, HMRC plans to hire more compliance staff to help eliminate non-compliance.
There is a lot to unpack from yesterday’s budget announcement, and Stonebridge will keep informed in the coming weeks as more information becomes available. It is evident that the recruitment and umbrella sectors are poised for significant changes.
Protecting our contingent workforce is our top priority, and it’s reassuring to see that reforms are being implemented to foster a fairer and more compliant environment.
Stonebridge will stay updated on any upcoming changes and will ensure that our supply chain is well-informed and ready to adapt, allowing us to navigate this market together with the highest level of compliance.
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