The UK Government announced some big changes to Employer National Insurance contributions (NICs) in the 2024 Autumn Budget. These changes will take effect on 6 April 2025, affecting businesses of all sizes, charities, and local councils. Consequently, they will affect businesses of all sizes, charities, and local councils, altering employer financial planning and payroll obligations. So, understanding these updates is significant for businesses that want to effectively manage their payroll data solutions and tax liabilities.
Key Changes to Employer National Insurance from April 2025
Starting in April 2025, the following adjustments will take place:
Increase in Employer National Insurance Rate: The rate of secondary Class 1 NICs will rise from 13.8% to 15%, subsequently increasing employers’ payroll costs.
Reduction in the Secondary Threshold: The threshold for Employer National Insurance liability will drop from £9,100 per year to £5,000 per year. Therefore, this means businesses must start paying Employer National Insurance on lower employee earnings.
Increase in Employment Allowance: Eligible businesses can claim up to £5,000 as a deduction from their bill. This will be increased to £10,500, and eligibility criteria will be expanded, removing the previous £100,000 employer NICs bill threshold.
These reforms, introduced via the National Insurance Contributions (Secondary Class 1 Contributions) Bill 2024-25, are expected to impact around 1.2 million employers across the UK.
How Will the Increase Affect My Business?
The impact will vary based on business size and workforce structure. According to HMRC’s impact assessment:
Due to the higher NIC rate and lower threshold, approximately 940,000 businesses will see their Employer National Insurance liability increase.
Around 250,000 employers will see their liability decrease due to the higher Employment Allowance.
About 820,000 employers will experience no change in their NICs obligations.
For small businesses and start-ups utilising accounting and bookkeeping services in Bolton, strategic financial planning will play an essential role in managing increased payroll costs. Companies using payroll tax solutions must assess how the new rates affect staff expenses and profitability.
Larger corporations with sizable workforces will bear a more significant financial burden. Meanwhile, businesses taking advantage of the increased Employment Allowance may find some relief. As a result, tax consultation services will play a crucial role in helping businesses recalibrate payroll strategies.
What Will Employer National Insurance Be From April 2025?
Employers should prepare for the following Employer National Insurance changes:
The standard rate will rise to 15%.
The threshold for liability will be reduced to £5,000 per year in earnings.
The Employment Allowance will increase to £10,500, so makes it available to more businesses.
Preparing Your Business for Upcoming Changes
To address these changes proactively and to mitigate financial impact, businesses should take some steps to consider:
Review Payroll Costs: Utilise payroll data solutions to assess how the increase in employer national insurance will affect your workforce costs.
Utilise the Employment Allowance: Confirm your business qualifies for increased relief and adjust budgets accordingly.
Consult Tax Professionals: To optimise tax efficiency, seek guidance from personal tax accountants for limited liability partnerships, tax consultants for freelancers, and VAT return preparation services.
Reassess Hiring Plans: Consider adjusting recruitment strategies and exploring flexible staffing options.
Budget for Increased Expenses: Update financial projections and allocate funds to cover higher Employer National Insurance obligations.
