April Initiates a Year of Change
April Initiates a Year of Change
April 2025 represents a significant month for the early years sector as multiple policy and economic changes commence. The changes come with the backdrop of the final stage of the childcare expansion plan looming in September.
Some of the key economic changes that will affect most businesses are:
• Employers' National Insurance (NI) contributions will rise from 13.8% to 15%
• Salary threshold for NIC contributions will drop from £9,100 to £5,000
• Smaller employers will receive some relief through an increased Employment Allowance from £5,000 to £10,500
• National Living Wage will rise by 6.7% to £12.21 for those aged 21 and over
• Basic rate capital gains tax on profits from selling shares to increase from 10% to 18%, with the higher rate rising from 20% to 24%
The general commentary around these changes has been negative and while the increase in outgoings will be impactful for businesses, it is important to note that there are ways that some businesses can get support. For instance, some will be eligible for a National Insurance break and can claim Employment Allowance to ease the burden. Businesses that are likely eligible for Employment allowance/NIC break include:
1. A small business with six employees (or fewer) each on median earnings of £33k
2. A small business with seven employees (or fewer) on the current minimum wage
Alongside these there are also some significant policy initiatives:
• Ofsted report card consultation closes
• 750 Schools begin early adoption of Free Breakfast Club Programme
• The new funding rates for the 2025/2026 financial year come into effect
• £75m Early Years Expansion Grant distributed to support nurseries, childminders and other providers to deliver the 35,000 additional staff and 70,000 places for the final stage of the expansion
• 45% increase in Early Years Pupil Premium (EYPP)
The Government has shown strong support for early years initiatives, with a greater focus than previous administrations. This suggests further announcements may follow to address the requirements for the successful implementation of the expansion plan. While many of the economic changes have faced criticism from within the sector, it's important to acknowledge the positives as well. However, questions remain about whether the sector can sustainably manage the numerous changes set to take effect throughout 2025.
Sources:
https://www.mortonmichel.com/news/autumn-budget-2024
https://ifs.org.uk/publications/annual-report-education-spending-england-2024-25