Changes to Employer National Insurance from April 2025
One of the employment costs to businesses in the UK, is the employer’s national insurance contributions on staff salaries. Employers pay national insurance contributions (NIC) as a percentage of the employee salaries over a statutory threshold. There are three significant changes to employer national insurance from April 2025 that will impact employers:
- An increase in the employer’s national insurance contribution rate from 13.8% to 15%.
- A reduction in the threshold at which employers start paying NICs from £9,100 to £5,000 per employee.
- An increase in the annual national insurance allowance from £5,000 to £10,500.
Eligible businesses can deduct the national insurance allowance from their national insurance contributions, reducing their liability. The allowance is aimed at smaller business, to help reduce the staff costs.
What is the financial impact of the NI changes?
Rate increase impact
For an employee earning £35,000, employer NICs will increase from £3,575 to £4,500 annually (£925 more), which is an effective increase of 26%. The figures breakdown as follows:
| Tax year 24/25 | Tax year 24/25 | Tax year 25/26 |
|---|---|---|
| Salary | £35,000 | £35,000 |
| Less threshold | – £9,100 | – £5,000 |
| Balance | £25,900 | £30,000 |
| NIC % | x 13.8% | x 15% |
| NIC’s | £3,574 | £4,500 |
Threshold Reduction Impact
The lowering of the threshold from £9,100 to £5,000 means:
- Employers will now pay NICs on an additional £4,100 of each employee’s salary
- At the new 15% rate, this equals £615 additional NICs per employee
- This affects all employees earning above £5,000, creating a significant cumulative effect, particularly in industries that employ part-time staff.
Combined Impact Examples
In the following examples, the impact of the increase in the Employer’s National Insurance allowance is included. Eligible employers receive the annual allowance as a reduction to their NIC costs which benefits new and small business owners. The Employer National Insurance Allowance is increasing from £5,000 to £10,500 from April 2025.
For a small business with 10 employees earning £25,000 each, the employer NICs will increase from £16,942 to £19,500 (£2,558) which is an increase of 15%. The table below breakdowns the figures for 2024/25 and 2025/26:
| Details | 2024/25 | 2025/26 |
|---|---|---|
| Av. salary | £25,000 | £25,000 |
| Less NI threshold | – £9,100 | – £5,000 |
| NICs due on | £15,900 | £20,000 |
| 13.8%/15% NICs | £2,194 | £3,000 |
| 10 X £2,194 | £21,940 | £30,000 |
| Less NIA | – £5,000 | £10,500 |
| NICs due | £16,942 | £19,500 |
For a business with 40 employees earning £35,000 each, the employer NICs will increase from £137,968 to £169,500 (£31,532) which is an increase of 23%. The table below breakdowns the figures for 2024/25 and 2025/26:
| Details | 2024/25 | 2025/26 |
|---|---|---|
| Av. salary | £35,000 | £35,000 |
| Less NI threshold | – £9,100 | – £5,000 |
| NICs due on | £25,900 | £30,000 |
| 13.8%/15% NICs | £3,574.20 | £4,500 |
| 40 x NICs | £142,968 | £180,000 |
| Less NIA | – £5,000 | – £10,500 |
| NICs due | £137,968 | £169,500 |
Economic implications
The increases in employer national insurance will significantly impact the profitability of businesses across the UK, with far-reaching economic consequences. Companies may respond by limiting pay increases, freezing recruitment or increasing prices for their goods and services. These changes will be economically challenging across the board.
Small business owner?
Are you a small business owner, concerned about the impact of the NIC increase on your business overheads? Our employer national insurance calculator lets you calculate the NIC increase at individual salary levels, comparing NICs for the tax years 2024/25 and 2025/26.