This April (2025), the UK government is increasing the rate for Employer National Insurance Contributions (NIC) to improve public finances and raise more money for public services.
Most businesses will be affected by this change in one way or another. The government estimates it will add 2% to employer payroll costs.
This article will break down what’s changing, and what measures you can take to minimise the cost.
What’s changing?
- The secondary Class 1 NICs rate will be increased from 13.8%, to 15%
- The secondary threshold will be reduced from £9,100, to £5,000
- The maximum Employment Allowance will be increased from £5,000 to £10,500
- Businesses with more than £100,000 in Class 1 National Insurance liabilities in the previous tax year will now be eligible for the Employment Allowance
All these changes come into effect on April 6th 2025.
What does that mean for your business?
The secondary Class 1 NICs rate will be increased from 13.8%, to 15%
Secondary Class 1 National Insurance Contributions are payments you are required to make to HM Revenue and Customs (HMRC) for each person you employ. You are required to pay a percentage of however much the employee has earned.
This change is simple. The rate is increasing for all employees. If you are liable for employer NIC, you will need to pay more.
The secondary threshold will be reduced from £9,100, to £5,000
The secondary threshold is how much each employee needs to earn before you are required to pay NIC as an employer.
Previously, employers didn’t need to pay any NIC for employees earning less than £9,100.
But this threshold is being reduced to £5,000 – so you may need to start paying NIC for lower paid employees.
The maximum Employment Allowance will be increased from £5,000 to £10,500
Here’s some good news.
The Employment Allowance lets you reduce your National Insurance bill. Previously, eligible businesses could reduce their bill by up to £5,000.
Now, eligible businesses can claim back up to £10,500.
That means some businesses will actually see their bill reduced. Some businesses may find they no longer need to pay National Insurance at all.
But these numbers are likely to be relatively small.
For most businesses, this simply means there’s a little more help available.
Businesses with more than £100,000 in Class 1 National Insurance liabilities in the previous tax year will now be eligible for the Employment Allowance
Previously, if you were required to pay more than £100,000 in Class 1 National Insurance during the previous tax year, you were not eligible for the Employment Allowance.
This restriction is being removed.
That means many more businesses will be eligible to claim back up to £10,500 on their National Insurance bill.
There’s a genuinely high chance this includes your business – so make sure you check your eligibility and take advantage of the help available.
What can you do about it?
Check if you’re eligible for help
Remember – you may be eligible for the Employment Allowance. That means you could reduce your National Insurance bill by up to £10,500.
You can check your eligibility here on the government’s website.
Review your budgets carefully
Staff cuts should be a last resort. The knock-on effects on motivation and productivity could cost you more than you save.
But now’s a good time to think about what you could live without. Consider software and services you rarely use, or don’t need. Think about switching to cheaper suppliers – or renegotiating contracts. Make sure you’re operating as efficiently as possible.
Minimise the cost with salary sacrifice
Properly implemented salary sacrifice benefits could help you minimise some – or all of the increase in National Insurance.
Salary sacrifice works by taking the money for benefits out of each employee’s salary before tax and National Insurance are calculated.
That means tax and National Insurance get calculated off a lower amount – so both you and your employees are liable for less National Insurance.
The more benefits your employees claim on salary sacrifice, the more you’ll both save – everybody wins.
If you haven’t implemented salary sacrifice – or want to expand your offering for bigger savings, now’s the time to do it.
Mintago has the largest selection of salary sacrifice benefits in the UK. Talk to our team to find out what’s available – and calculate your potential savings.
Downsize office space
Cutting staff or salaries is likely to have a negative knock on effect, but you may be able to minimise costs by downsizing your office space instead.
Meet with heads of departments to understand how much of their team’s work requires a physical, shared location. You may find a hybrid model allows everyone to benefit from face-to-face time with colleagues, but with a much smaller overhead.
Giving your employees more flexibility over how they work is likely to boost morale too. Not only do you demonstrate trust in your team – you’ll be saving people money on their commuting costs.
Join our free webinar for more information
The best thing you can do to prepare for the rise in employer National Insurance is… prepare.
That’s why we’re running a free webinar on the 26th February, to go over the changes in even more detail.
You can expect a full breakdown on what’s changing – plus the chance to put your questions to our team of experts.