Labour has promised its measures are “protecting” worker wages while confirming that you’ll have to wait another four years for a tax break.
The Government was asked in Parliament by DUP MP, Gregory Campbell, about how many people would become taxpayers with the increase to the National Living Wage next April.
The minimum wage for over 21s, known as the National Living Wage, is to increase substantially from the start of April 2025, increasing 6.7 percent from £11.44 an hour to £12.21 an hour.
The minimum wage for those aged 18 to 20 will increase from £8.60 an hour to £10 an hour while the rate for under 18s will increase from £6.40 to £7.55.
In Labour’s response to Mr Campbell, Treasury minister James Murray said the pay rise would boost wages for over three million workers, a £1,400 a year increase for full-time workers.
Turning to the question of the growing tax burden for workers, the minister said: “The Government is protecting working people’s payslips by, not increasing the basic, higher or additional rates of income tax, or employee National Insurance contributions.
“It is also not extending the freeze on personal tax thresholds, allowing them to rise with inflation from April 2028.”
The current thresholds for paying income tax have been frozen since 2022, but as wages have increased people’s tax bills will go up too.
Under the current rules, you can earn up to £12,570 a year without paying tax, after which you pay the tax at 20 percent up to 50,271.
If you were on the current National Living Wage of £11.44 an hour working full time at 37.5 hours a week, you would already be paying the tax.
There was one sweeping tax increase announced in the Budget that will affect workers, as the element of National Insurance that employers pay is to increase from 13.8% to 15%.
Although workers will not pay this tax themselves, as this increases the cost of a worker to employers, there have been concerns employers could reduce their workforce as a result.
Romi Savova, CEO at PensionBee, said when the tax increase was announced: “An increase in the National Insurance rate for employers poses a direct challenge not only to business sustainability but also to the financial well-being of working people.
“For businesses, particularly small and medium-sized ones already navigating rising wage pressures, this added cost may threaten survival and force difficult choices.
“Ultimately, these changes act as a tax on work, with a real potential to strain the labour market, slow economic growth and reduce wage growth and generous pension contributions.
“It’s a straightforward economic principle: burdens on business inevitably filter down, affecting workers, growth, and, in turn, the broader health of the economy.”
