NIC Increases from April 2025
The Autumn Budget 2024 introduced significant updates to employer National Insurance contributions (NICs) and the Employment Allowance, both effective from 6 April 2025.
In this short post we have highlighted the NIC increases and changes and pointed to strategies that you may want to consider in future to reduce the impact on your payment of employer’s NIC.
NIC increases – key changes
Reduction in the NICs secondary threshold: Employers will start paying NICs on employee earnings above £5,000 a year (down from £9,100).
Increase in NICs rates: Secondary Class 1 NICs, as well as Class 1A and 1B rates for expenses and benefits, will rise from 13.8% to 15%.
Enhanced Employment Allowance: The allowance will increase from £5,000 to £10,500.
Removal of the £100,000 eligibility threshold: Employers of all sizes can now claim Employment Allowance.
NIC increases – Impact on smaller businesses
For the 2025-26 tax year, employers’ National Insurance Contributions (NICs) up to £10,500 will be considered free of Employers’ NIC due to the increased Employment Allowance, which allows eligible employers to deduct this amount from their NIC liability, effectively making the first £10,500 of their employer’s NICs tax-free.
Strategies to mitigate this Employer’s NIC increases
Every business will have a unique set of factors that influence how it can adapt to reduce tax and NIC costs. The ideas listed below may or may not be beneficial to your circumstances which is why you should seek professional advice before implementation.
You could consider:
- Create or extend salary sacrifice schemes.
- Make sure you take full advantage of the NIC free Employment Allowance (worth £10,500 a year from April 2025).
- Explore adapting AI to optimise (reduce) staffing levels.
- Review existing Benefit in Kind packages to reduce the annual Class 1A NIC cost. For example, by switching to lower CO2 rated company cars.
- Where possible, use legitimate self-employed contractors rather than additional employed persons.
- Rather than employ one person full-time, would it be possible to employ two or three part-time employees?
- Create business plans that will enable you to “What If” the various options and settle on strategies that produce the lowest cost impact.
If you have concerns about the effect that these NIC increases will have on your business, please contact us or telephone us on 020 7870 9050 and a member of our team will be happy to assit.