Martin Lewis issues warning as 700,000 workers to be hit by National Insurance hikes

has shared how the change to business National Insurance rates in the Budget will have a "direct" impact on the take home pay of 700,000 workers.

The Money Saving Expert (MSE) website founder returned to screens for the second time this week for the Special. The show tonight focused on this week's first Labour budget and discussed everything that was announced on Wednesday.

In the show, Martin highlighted the huge change to business National Insurance rates and said although he usually spoke solely on consumer issues, this was "too big" not to mention. He also warned that this could potentially have knock-on effects. Martin explained to the audience that the rate of National Insurance paid by firms and businesses will rise from 13.8% to 15% from April 2025.

Alongside this, the earnings threshold for when employers start paying National Insurance will also be lowered from £9,100 per year to £5,000. Martin said this means businesses would be paying National Insurance on an extra £4,100 at the new rate from next year. After doing some quick maths, Martin said this would see a business pay an extra £615 per employee per year adding: "It is a very big rise."

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However, Martin did note that companies with a national insurance bill of less than £100,000 a year can be exempt from paying the first £5,000 of employers' national insurance contributions under a programme called the employment allowance. The budget changed this and has removed the £100,000 threshold so more businesses will be included and the allowance will increase from £5,000 to £10,500.

He explained: "So if your National Insurance bill is under £10,500 you won't pay any national insurance for your employees as a third date for smaller businesses out there.

Martin noted that although this was a change for businesses, it would have an "indirect impact" on employees' pockets. He added: "Firms have to make a choice. Are they going to reduce their profits? Are they going to charge their customers more? or are they going to reduce future employee benefits and salaries?"

"The official body on this said, they'll only be able to pass on around 60% of the cost to employees in the short term. So it's saying around 60% of this will actually be a cost met by employees, which is why it's fair to say this is an indirect tax rise on the employees then."

Martin received a question from an audience member who was self-employed and was working through an umbrella company. An umbrella company acts as an intermediary between an independent contractor and their recruitment agency or direct client. When you work through an umbrella, you are enrolled in the umbrella company's PAYE system, and they pay you an income from the invoice after deducting items like tax, National Insurance contributions, and agreed fees.

The audience member asked: "I pay both employer National Insurance and employee National Insurance. Out of what I earn, has the budget reduced my take home pay?" In response, Martin simply said: "Almost certainly, yes."

He explained: "There are around 700,000 people who work through umbrella companies. They're often freelancers or supply teachers and they are counted as PAYE workers for an agency, but they're sort of self employed."

Alongside Martin on tonight's show was Carrie, who was a tax specialist, and Martin asked whether this change for businesses would impact these workers. She said: "Yes, that's correct, because where you have companies which have sole directors and employees, they will not qualify for the employement allowance. So the company is going to be paying more employers' National Insurance, and that, therefore, means that the employee will have less to take home because they pay their own employer's National Insurance."

Martin closed the section by saying: "So being really honest, I said that there was an indirect impact for workers, but for the 700,000 umbrella company workers, there is a direct impact on the take home pay of working people."

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