Starting from 6th April 2025, significant changes to the UK’s National Insurance Contributions (NICs) will come into effect, impacting employers nationwide. It’s essential for businesses to understand these modifications to plan accordingly.
Increase in Employer NIC Rate
The rate of employer NICs will rise from the current 13.8% to 15%. This increase means that for every employee earning above the Secondary Threshold, employers will contribute a higher percentage of their earnings to NICs.
Check out the rates and thresholds here!
Reduction in Secondary Threshold
The Secondary Threshold—the earnings level at which employers begin paying NICs—will decrease from £9,100 to £5,000 per annum. Consequently, employers will start contributing NICs on employee earnings exceeding £5,000, broadening the scope of NIC liabilities.
Enhancement of Employment Allowance
Additionally, to mitigate the impact on smaller businesses, the Employment Allowance will increase from £5,000 to £10,500 annually. Furthermore, the previous restriction preventing employers with NIC liabilities exceeding £100,000 in the prior tax year from claiming this allowance will be removed. This change allows a broader range of businesses to benefit from reduced NIC liabilities.
Check out HMRC’s latest publication on Employment Allowance
Understanding the Employment Allowance
The Employment Allowance is a relief that enables eligible employers to reduce their annual NIC bill by a specified amount. With the upcoming increase to £10,500, businesses can offset a more substantial portion of their NIC liabilities, easing the financial burden associated with employing staff.
Financial Impact on Businesses: Examples
Consider the following scenarios to illustrate the financial implications:
Example: Small & Medium-Sized Business Employer NIC costs
- Current Scenario (2024-25):
- Employee Salary: £36,000 per annum
- NIC Payable: 13.8% on earnings above £9,100
- NIC Calculation: £36,000 – £9,100 = £26,900
- NIC Due: £26,900 x 13.8% = £3,712.20
- Future Scenario (2025-26):
- Employee Salary: £36,000 per annum
- NIC Payable: 15% on earnings above £5,000
- NIC Calculation: £36,000 – £5,000 = £31,000
- NIC Due: £31,000 x 15% = £4,650
- Additional Annual Cost per Employee: £4,650 – £3,712.20 = £937.80
Example: Small Business Utilising Employment Allowance
- Annual NIC Liability Before Allowance: £8,000
- Current Employment Allowance: £5,000
- NIC Payable After Allowance (2024-25): £8,000 – £5,000 = £3,000
- Future Employment Allowance (2025-26): £10,500
- NIC Payable After Allowance: £8,000 – £10,500 = £0 (with £2,500 allowance remaining)
- Impact: The increased Employment Allowance not only covers the entire NIC liability but also leaves an unused allowance, providing significant relief to small businesses.
How Brisan Can Assist
Navigating these changes can be complex, but Brisan is here to support your business through:
- Comprehensive Payroll Management: We handle all aspects of payroll processing, ensuring accurate calculations and timely submissions, so you remain compliant with the latest NIC regulations.
- Expert Guidance on Obligations: Our team provides clear insights into your NIC obligations, helping you understand how the changes affect your business and advising on strategies to optimize your contributions.
- Budgeting and Forecasting Support: We assist in developing financial forecasts and budgets that account for the increased NIC rates and threshold adjustments, enabling you to plan effectively for the future.
By partnering with Brisan, you can confidently manage these upcoming changes, ensuring your business remains compliant and financially resilient.
Contact us if you would like support in navigating the new employer NIC rates.
