National Insurance is changing. With the new tax year starting on 6th April 2025, there are some important changes to National Insurance Contributions (NICs) that could affect your business. These updates will impact both employer NIC rates and thresholds, and it’s worth reviewing how they may influence your payroll, costs and potentially your business's structure moving forward.
National Insurance Now (2024/25)
For the 2024/25 tax year, employers are paying NICs at a rate of 13.8% on employee earnings above the Secondary Threshold, which is set at £9,100 per year. Many businesses are also benefitting from the Employment Allowance, which currently allows eligible employers to reduce their NIC bill by up to £5,000.
National Insurance Changes from April 2025
From 6th April 2025, the Employer NIC rate will increase to 15%. At the same time, the Secondary Threshold is being reduced from £9,100 to £5,000, meaning employers will start paying NICs on a larger portion of each employee's salary.
The good news is that the Employment Allowance is also increasing from £5,000 to £10,500, which will offer more relief to businesses with staff. However, it’s important to note that companies where you are the sole director, and the only employee will still not qualify for this allowance.
Why The Changes to National Insurance Matter
These changes will mean higher costs for many businesses, especially those with multiple employees or where directors pay themselves via salary. The reduced threshold and higher NIC rate will increase the NIC bill across the board, and while the increased Employment Allowance will soften the blow for some, others – such as sole director companies – may face a noticeable rise in payroll costs.
A Few Simple Examples
For a sole director company paying a salary of £12,570, the Employer NIC liability this year is around £479. From April 2025, this will jump to approximately £1,136 – an increase of over £650 annually, with no allowance to offset the cost.
For a company with 10 employees each earning the equivalent of the new National Living Wage (around £24,000 annually), the total Employer NICs could rise by over £2,400 next year, even after factoring in the higher Employment Allowance.
Not all businesses will see a rise in their Employer National Insurance bill. In some cases, the increased Employment Allowance will offset the higher NIC rate and lower threshold entirely.
For a company with 2 employees each earning the equivalent of the new National Living Wage (again around £24,000 annually), the total Employer NIC liability next year will be approximately £5,650. However, with the Employment Allowance rising, this business won’t pay any Employer NICs, as the entire amount will be fully covered by the allowance.
What Should You Do Next?
This is a good time to review your payroll structure and company setup. For some businesses, the changes to National Insurance may push them to assess how salaries and dividends are structured or whether there are other planning opportunities to help manage this increase in employment costs.
We recommend reviewing your forecasts and budgets to factor in these changes, particularly if you run a business with several employees or where salaries sit just above the thresholds.
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