The national minimum wage paid to those aged over 21 was increased by 6.7% by Chancellor Rachel Reeves today, rising from £11.44 to £12.21 an hour.
Those aged between 18 to 20 also saw their minimum hourly rate increase 16.3% from £8.60 to £10.
Reeves also relieved some of the tax burden on employees, increasing the National Insurance that businesses pay for their workers by 1.2 percentage points to 15%.
She also lowered the earnings threshold at which companies pay from £9,100 to £5,000, which could generate an extra £25bn in tax revenue – more than making up for the £22bn ‘black hole’ left by the previous government.
While employees may be pleased with the news, AJ Bell’s investment director Russ Mould said the moves are “a burden on business” that could backfire on working people.
See also: Autumn Budget 2024: Capital gains tax hiked to 24% in ‘blow for investors’
“A higher rate of employer national insurance, a rise in the minimum wage and changes to employment rights will all drive up costs,” he said. “That’s likely to be seen as negative for job creation, wages and consumer prices, and businesses will inevitably pass on extra costs to the customer.”
Others were more positive on the chancellor’s decision, noting that higher wages would boost consumer spending and ultimtely strengthen economic growth.
Emma Mogford, manager of the Premier Miton Monthly Income fund, said: “Today’s ‘decade of renewal’ budget sets the UK on a path to higher investment and growth, which should be good for UK equities.
“While the increase in minimum wages will initially mean a higher wage bill, the boost to low incomes will flow through into consumer spending and ultimately lead to higher retail sales.”
