UK Budget 2024: Key Changes for Employee Benefits & Business Strategy

The UK government’s Autumn 2024 budget announcement introduced several fiscal changes impacting businesses, employees, and the economy. As employee benefits specialists, we understand the importance of translating these updates into effective benefits strategies, essential for supporting employee well-being, attracting and retaining talent, and achieving business goals. Here, we outline the key budget highlights and provide practical insights to guide your employee benefits planning.

1. Public Finances & Economic Outlook

Shortfall Addressed: The government has disclosed a £22 billion shortfall and committed to greater transparency in financial reporting.

Economic Forecast: The Office for Budget Responsibility (OBR) projects UK economic growth of 1.1% in 2024, 2% in 2025, and 1.8% in 2026.

Eppione: “With moderate growth expected amid financial challenges, businesses should consider implementing financial wellness programmes. Supporting employees with tools to manage their finances can help maintain morale and productivity, making financial wellness an increasingly valuable benefit.”

2. Tax Changes (NICs, CGT, and IHT Adjustments)

National Insurance Contributions (NICs): From April 2025, employers’ NICs will increase from 13.8% to 15%, and the earnings threshold at which employers start paying NICs will reduce from £9,100 to £5,000.

Capital Gains Tax (CGT): Basic CGT rates will increase from 10% to 18%, and higher rates from 20% to 24%.

Inheritance Tax (IHT) Adjustments: The IHT threshold of £325,000 will remain fixed until 2030. From 2027, inherited pensions will become subject to IHT, and high-value assets, such as agricultural land and businesses worth over £1 million, will be taxed at 20%.

Eppione:
NICs and CGT: “With NIC increases impacting payroll budgets, salary sacrifice schemes—such as pension contributions, childcare, and other tax-efficient benefits—could help manage costs while offering employees valuable tax advantages. Assessing these options early will be key to mitigating costs and enhancing engagement.”

Inheritance Tax on Pensions: “The inclusion of inherited pensions within IHT introduces a significant change to estate planning. Previously, pensions provided a tax-efficient way to pass on wealth. Now, however, it remains unclear how inherited pensions—especially defined benefit (DB) schemes or pensions in payment—will be valued for IHT. Further questions include the timing of tax payment and valuation criteria. Offering financial planning resources and estate advice will be invaluable for employees facing these new complexities.”

3. UK Minimum Wage Increases

New Rates: The National Minimum Wage (NMW) will rise by 6.7%, with the rate for those aged 21 and over increasing from £11.44 to £12.21 per hour, and a new rate of £10 per hour for those aged 16-18.

Eppione: “In addition to adjusting salary budgets to comply with new wage requirements, employers should consider introducing financial wellness initiatives or performance incentives to attract and retain entry-level talent. Benefits that help employees maximise their increased income and feel financially secure will be highly valued.”

4. Income Tax Threshold Freeze

Threshold Update: The freeze on income tax thresholds will continue until 2028-29, potentially causing “fiscal drag”, where employees gradually enter higher tax bands without an increase in real earnings.

Eppione: “As employees are likely to move into higher tax bands, expanding tax-efficient benefits like pensions or health cover could help them retain more take-home pay. This approach supports employees’ financial wellbeing and strengthens your benefits offering.”

5. UK Pension Changes

State Pension Increase: The state pension will increase by 4.1% in the 2025-26 tax year.

Eppione: “With the state pension rising, businesses should consider enhancing pension matching and providing tools for retirement planning. A well-rounded pension package is a valuable retention tool, especially with the upcoming NIC changes, helping employees plan securely for the future.”

6. Business Rates Relief

New Relief Measures: A 40% business rates relief will be available for the retail, hospitality, and leisure sectors, capped at £110,000 per business for 2024 and 2026.

Eppione: “Businesses eligible for this relief could reinvest these funds into employee benefits or other strategic initiatives. In industries reliant on lower-wage workforces, diversified benefits can help improve retention and engagement, which will be crucial as these sectors continue to recover.”

7. Education Funding and Childcare Support

Increased Funding: The budget includes additional support for breakfast clubs and childcare services.

Eppione: “This focus on childcare offers businesses a chance to align their benefits with family-friendly policies. Providing support for working parents through subsidised childcare or flexible working arrangements can improve retention, attract talent, and support diversity goals.”

Conclusion

The 2024 UK Budget introduces changes that will affect businesses and shape employee benefits planning. Adjustments to NICs, minimum wage, and IHT provide an opportunity to review and refine benefits strategies. By optimizing pension contributions, enhancing family benefits, and focusing on financial education, employers can help employees navigate these changes, reduce financial stress, and improve engagement.

Eppione: “This budget presents a chance to strengthen employee benefits and adapt to fiscal changes thoughtfully. By focusing on flexible, tax-efficient, and supportive benefits, businesses can meet both employee needs and company objectives. For tailored guidance on integrating these updates, reach out to Eppione. Together, we can ensure your benefits strategy is fully optimised for growth and support

For more information about Eppione’s Employee Benefits Consulting, visit our website.