How does the Autumn Budget impact on parents and the childcare sector?
On Wednesday 30 October, Chancellor of the Exchequer, Rachel Reeves presented the first Labour Budget in 14 years to the House of Commons. Her Autumn Statement saw a number of changes announced which will impact families and businesses from April 2025, including an increase in the National Living Wage and National Minimum Wage, changes to employer National Insurance Contributions and an uplift to benefits and pensions.
Uplift in the National Living and Minimum Wages
From April 2025 the National Living Wage, paid to those 21 years old and over, will increase by 6.7%, from £11.44 to 12.21 per hour. Employees under 21 will benefits from a greater increase, for 18-20 year olds the National Minimum Wage will increase by 16.3% from £8.60 to £10.00 per hour, and for 16 and 17 year olds and Apprentices the increase will be 18%, from £6.40 to £7.55 per hour.
Employer National Insurance Contributions
Also taking effect in April 2025 is an increase to the rate of Employers National Insurance Contributions (NIC) will rise from 13.8% to 15% with a reduction to the threshold of when it starts to be paid. However, many small businesses are able to receive a rebate through the which will be rising from £5,000 to £10,500, meaning that more employers will not have to pay any NIC at all next year.
The increase to the National Living Wage and the National Minimum Wages will be provide a welcome boost in income for many working parents, as these increases are at higher rates than the current rate of inflation. However they will present a challenge for many employers, who have no choice but to implement these pay rises, which will have a significant impact on many businesses’ profitability and could result in many employers passing these higher costs on through increased prices to consumers.
Budget impact on childcare sector
In her Budget, Chancellor Rachel Reeves recommitted the Government to the expansion of funded childcare hours that the previous Conservative Chancellor, Jeremy Hunt, had announced in March 2023. This means that total spending on childcare is set to rise by £1.8 billion next year.
However, the biggest impact of the latest Budget on the childcare sector is in how it will affect staffing costs. Parents using registered childcare who see their incomes rise as a result of this announcement may also see their outgoings rise as their childcare provider may have no choice but to pass on the additional wage costs in the form of higher childcare fees. In Northern Ireland, this could offset the benefit to many families of the 15% Northern Ireland Childcare Subsidy, though funding for this scheme is currently only confirmed up until March 2025.
While there was also an uplift to announced to Universal Credit, which includes support for childcare costs, this is a much lower rate of only 1.7% which falls well below the potential rise in outgoings. There has been no increase to the support available to families through Tax-Free Childcare, which remains at 20% for eligible parents, capped at £2,000 per child, per year (or £4,000 for disabled children).
We are here to help you
We know it can be difficult how these changes will impact your family. If you have questions about the financial support you are entitled to, contact the Family Benefits Advice Service on 028 9267 8200 or email hello@employersforchildcare.org for free, impartial and confidential advice.
