The government has announced significant changes to National Insurance Contributions (NICs) that will impact employers from April 2025. These changes are part of the government’s most recent budget announcements and will impact employers across various sectors.
Key Changes to Employer NICs
- Increase in Employer NIC Rate: The rate at which employers contribute to NICs will rise from the current 13.8% to 15%. This means that for every £1 paid in salary above the threshold, employers will now contribute 15p in NICs.
- Reduction in Secondary Threshold: The earnings threshold at which employers start paying NICs will decrease from £9,100 to £5,000 per annum. Consequently, a larger portion of employees’ salaries will be subject to employer NICs.
- Increase in Employment Allowance: To support smaller businesses, the Employment Allowance will increase from £5,000 to £10,500. Additionally, the £100,000 eligibility threshold for this allowance will be removed, allowing more businesses to benefit.
Implications for Your Business
These changes will result in higher employment costs for your business. We have provided two examples below of the impact this will have on an employer.
Q: I am a “one man” band and I pay myself £9,100 in salary and the rest of my earnings are taken as dividends as and when the company makes the relevant profits. Will this impact me?
A: Yes. Be prepared to pay some NICs from 6 April 2025 onwards. At the moment, it is likely that you don’t pay any NIC on that level of salary, given the current NIC threshold.
From April 2025, your NIC contributions will rise from £0 to £615 per annum.
Q: I have multiple employees with the average employee earning £25,000. Will this impact me?
A: Yes. The change in rate and the reduction in threshold will impact you as an employee. The rate is increasing to 15% and the threshold in which an employer pays NIC at is reducing to £5,000.
Therefore, an employer’s National Insurance Contributions will increase from approximately £182.90 to £249.95 per month from April 2025. This is an annual rise of £804.60 for the employer, per employee.
Recommended Actions
- Review Payroll Budgets: Assess the financial impact of these changes on your payroll expenses and adjust your budgets accordingly.
- Utilise Employment Allowance: Ensure you are taking full advantage of the increased Employment Allowance to offset some of the additional NIC costs.
- For those who are currently remunerating themselves with small salary for NIC purposes, we are recommending you increase this to £12,570 to make use of the personal allowance. This may cost you more as an employer in NICs but the corporation tax savings outweigh the increase NIC contributions.
- Consult with a Financial Advisor: Seek professional advice to explore strategies that may help mitigate the impact of these changes on your business.
Further Information
We understand that navigating these changes can be challenging. Our team here at NRB is here to provide support and guidance tailored to your specific circumstances.
Please do not hesitate to contact your NRB advisor to discuss how we can assist you during this transition or if you are not a client of NRB, get in touch today to discover how we can assist you.
Check out our other services by clicking here.
