[12.03.25]

In April 2025, Employers’ National Insurance Contribution (NIC) rates will increase from 13.8% to 15%.  In addition, the level at which employers start paying NICs will also reduce from £9,100 to £5,000 per year.

To help small businesses offset the increased NIC costs, the Employment Allowance, which helps eligible employers reduce their NIC liability, will increase from £5,000 to £10,500, and the £100,000 eligibility threshold will be removed.  This increase aims to partially compensate some smaller employers for the increase in secondary contributions.

Other eligibility criteria for the Employment Allowance remain in force, including that only one connected business in a group can claim the Allowance. Similarly, businesses with more than one payroll or PAYE reference for the tax year can only claim against one payroll.  The following are also excluded from the Employment Allowance:

• public sector bodies, or businesses carrying out more than 50% of their work in the public sector (except charities)
• those employing domestic employees such as cleaners or gardeners, unless they are care or support workers
• sole director limited companies with no other employees paid above the secondary threshold. However, provided there is at least one other employee (or director) with sufficient earnings for there to be a secondary NIC liability, meaning an employee with earnings of at least £5,000 for the tax year 2025/26, then this eligibility criterion is met.

Where we run the payroll for your business, and the business becomes eligible for the Employment Allowance we will automatically add this to your payroll.

These changes to the Employers’ NIC will affect businesses differently depending on their individual circumstances.

Where there is an increase to the Employers’ NIC costs, there are a number of options that you may like to consider:

• Offering salary sacrifice schemes, including increased pension contributions or benefits in kind which are tax-efficient and not subject to NICs, such as company cars with low CO2 emissions, health insurance or childcare vouchers.
• Outsourcing activities such as payroll, marketing or HR
• Reducing other costs to accommodate these increased costs, for example downsizing your workplace by allowing team members to work from home all or part of the time
• Renegotiating contracts with suppliers
• Considering where you can use Artificial Intelligence to help you become more efficient
• Passing on the increased costs to your clients through increased prices/fees

Should you wish to understand the impact on your Employers’ NIC bill, please contact Jackie, Andrew or Siobhan.

Castletons Accountants