April 6 marks the start of the new financial year and it is always a good time to be considering new investments. For some companies, annual tax allowances may begin again at this time.

This year decisions over when to make capital investments are even more important, because of the implementation of new employment tax legislation announced back in the 2024 Autumn Budget.

Some of the upcoming changes, particularly the new employer’s National Insurance rules, will lead to increases in the costs of employing people. These extra costs, together with the already challenging skills crisis, are creating something of a perfect storm for business owners who are faced with increasing costs due to inflation. It makes warehouse automation an increasingly attractive option for any company looking to future proof its business operations and manage costs effectively.

This blog article explains what companies operating a busy warehouse should understand about the changes being introduced and why it makes sense to be implementing a warehouse management system (WMS) right now.

How are taxes going up in April 2025?

Increases to National Insurance costs

Employer’s Class 1, 1A and 1B National Insurance Contributions (NICs) are increasing by 1.2% from April 2025, bringing the rates to 15%. This is a tax levied against employers for their employees.

At the same time, Class 1 NIC secondary thresholds are reducing from £9,100 to £5,000 per annum. This is effective from 6 April 2025 until 5 April 2028. After this date the NICs will then increase in line with CPI.

For an employee earning the average UK salary of £34,963 (as of October 2024), the employer’s NIC liability will increase by approximately £596 per year from 6 April 2025.

Increases to Minimum Wage rates

In addition, the National Living Wage is increasing from April 2025. For over 21s, the rate of NLW is identical to the National Minimum Wage (NMW) and it increases from £11.44 to £12.21ph (6.7%) or £23,873.60 pa for a full-time worker. The 18–20-year-old rate increases from £8.60 to £10 (16.3%), up by £2,737 to £19,522 pa.

Cost analysis – worked example

For a worker on the National Living Wage (£12.21 per hour from 6 April 2025), working full-time, the employer’s additional NIC cost will be around £681 per year. Given that many warehouses do employ significant numbers of workers at NLW rates, this could be a significant cost.

For example, consider a small warehouse employing 10 warehouse operatives on the minimum wage rate of £23,873.60 pa. The annual wage bill for these employees is £238,736.

The extra annual cost of these 10 warehouse operatives due to the rise in NICs and wage costs would be £81,720, making a total for the year of £328,456.

This represents a substantial financial resource that could potentially be invested in warehouse automation technologies such as a WMS. Do you future proof your business or just incur expense with no added value to the company? It’s a bit of a no brainer!

The business case for WMS

One of the most common observations new WMS users make when they start using the software is how it enables them to ‘do more with less’. What they mean specifically is that they can increase the volumes of orders and transactions their warehouse can process in a given period, without having to increase headcount and labour costs.

In addition, there are also some other very significant business case considerations:

Effective inventory management is essential for businesses, as stock represents one of the largest expenses after personnel costs. Careful stock management is crucial, and a WMS can optimise this process by minimising shortages and avoiding production delays.

A WMS also enhances stock tracking by providing real-time inventory updates, enabling the operation of a “just-in-time” warehouse. This approach ensures stock is ordered precisely when needed, helping to preserve cash flow.

Given the rising costs of purchasing and renting warehouse space – a trend likely to persist – a WMS helps maximise warehouse efficiency. Our experience indicates that properly managed warehouses can store up to 30% more inventory in the same space, leading to significant long-term savings. Additionally, the system suggests optimal storage locations for similar items and streamlines order fulfilment by helping operatives quickly locate products.

Implementing a WMS delivers rapid improvements in efficiency, productivity, and accuracy in your warehouse. With the recent Budget announcement highlighting increased worker-related expenses from April 2025, now is an ideal time to build a compelling business case for adopting a WMS. Let Indigo Software show you how.

Disclaimer: This blog does not constitute tax advice. Tax law is complex so speak to your accountant about the relevance and appropriateness for your business.