The Autumn Budget on 30 October 2024 announced the biggest change to employer National Insurance in years. From 6 April 2025, employers will pay more on almost every employee's wages.
If you employ staff, even one part-time person, this affects your costs from the new tax year. But it does not hit every business the same way. Some small employers will pay less than they do now.
In this post we set out what is changing, show what it costs with real numbers, and list what to do before April.
The changes are in a Bill going through Parliament at the time of writing. The figures below are the ones HMRC has published.
What is changing on 6 April 2025
There are three changes. Two increase your costs. One reduces them.
Employer NIC rate: 13.8% now, 15% from 6 April 2025
Pay where employer NIC starts (secondary threshold): £9,100 a year now, £5,000 a year from 6 April 2025
Employment Allowance: up to £5,000 now, up to £10,500 from 6 April 2025
Employment Allowance limit: now only if last year's employer NIC was under £100,000. From 6 April 2025 this limit is removed
The rate goes up. You will pay 15% on each employee's pay above the threshold, up from 13.8%.
The threshold comes down. You currently pay nothing on the first £9,100 of each employee's pay. From April that falls to £5,000. So you pay employer NIC on an extra £4,100 of every employee's wages.
The Employment Allowance more than doubles. This allowance reduces your employer NIC bill each year. It rises from £5,000 to £10,500. Larger employers can now claim it too. The other eligibility rules still apply.
These measures do not change employee NIC rates or thresholds.
Different rules apply to some employees, such as under-21s and apprentices under 25. We cover these in our next post.
What it costs: two examples
To keep things simple, these examples use annual pay for a full tax year. In practice, NIC is worked out each pay period.
One employee on £30,000 a year
Now: (£30,000 − £9,100) × 13.8% = £2,884.20
From April 2025: (£30,000 − £5,000) × 15% = £3,750.00
Increase: £865.80 a year
That is before the Employment Allowance. If you are eligible for the allowance, it covers the whole bill in both years, so you pay nothing.
Four employees on £30,000 each, claiming the Employment Allowance
Now: 4 × £2,884.20 = £11,536.80, less £5,000 allowance = £6,536.80
From April 2025: 4 × £3,750.00 = £15,000.00, less £10,500 allowance = £4,500.00
Saving: £2,036.80 a year
This is the point many headlines missed. For a small team, the larger allowance can outweigh the higher rate. Larger employers, or those who can't claim the allowance, may pay more.
Every business is different. The cost depends on how many people you employ, what you pay them, and whether you can claim the allowance.
If you are the only director on the payroll
Many director-only companies will pay more. A company with one director cannot claim the Employment Allowance if that director is the only employee paying employer NIC. That rule is not changing. If the company also employs someone else whose pay attracts employer NIC, it can claim.
Many director-only companies pay a salary of £12,570, which uses the personal allowance. Here is the employer NIC on that salary:
Now: (£12,570 − £9,100) × 13.8% = £478.86
From April 2025: (£12,570 − £5,000) × 15% = £1,135.50
The salary and the NIC both reduce your company's Corporation Tax. So the real cost is lower than these figures. But the best salary level for a director may now be different. It depends on your profits and your Corporation Tax rate.
If this is you, ask us to work out the right salary for 2025/26 before you set up your April payroll.
What to do before April
Work out your new cost. Take each employee's annual pay, deduct £5,000, and multiply by 15%. Add them up and take off the allowance if you can claim it.
Check if you can now claim the Employment Allowance. If your employer NIC was £100,000 or more last year, you may be able to claim for the first time. Other eligibility rules still apply.
Make sure you are claiming it at all. The allowance is not automatic. You claim it through your payroll software each tax year.
Review director salaries. The best level for 2025/26 may not be the same as this year.
Plan pay rises and new hires. Build the higher cost into your budget and your prices before 6 April.
Summary
From 6 April 2025, employers pay 15% NIC on pay above £5,000. The Employment Allowance rises to £10,500. Some employers will pay less overall and others will pay more. It depends on your staff, their pay and whether you can claim the allowance.
If you would like us to check your figures or set up your payroll for the new tax year, book a call or contact us.