Chancellor Rachel Reeves’ Autumn Budget has introduced several notable changes to Employers’ National Insurance (NI) rates and thresholds, which will impact payroll costs for many UK businesses.
Key Changes to Employers’ NI
Effective from 1 April 2025, the Employers’ National Insurance rate will increase from 13.8% to 15%. Alongside this, the threshold at which employers begin paying NI contributions will drop significantly. This will be going from £9,100 to £5,000 per employee per year. Together, these adjustments may lead to higher payroll expenses for many companies, particularly those with larger workforces or lower-wage roles.
Increased Employment Allowance
To help manage the increase, the Chancellor announced expansion of the Employment Allowance, which will rise from £5,000 to £10,500. With this increased allowance, 865,000 employers are projected to pay no NI next year, with over a million expected to see no increase or even a reduction in NI contributions.
For example, a small business employing four full-time staff on the National Living Wage will be exempt from NI contributions on these wages, providing valuable relief for smaller employers.
Support for Larger Employers
Additional benefits are also extended to larger employers. Previously, Employment Allowance eligibility was limited to those with Employers’ NI liabilities below £100,000 annually. This restriction will be removed, allowing all eligible employers, regardless of total NI liabilities, to reduce contributions by £10,500.
What Does This Mean for Your Business?
As businesses prepare staffing and payroll plans for the coming years, it’s essential to incorporate these NI adjustments into financial forecasts. If you require guidance in re-evaluating your budget, please reach out to us—we’re here to assist with the transition.
Further Information
If you would like more information on changes in the budget, please contact your usual NRB advisor.
Click here to check out our article on the Autumn Budget 2024 – Main Highlights where we went into more detail explaining the changes within the budget.
