Q:I run a relatively new business. Our employer National Insurance contributions are quite modest at this point, standing at £13,900 annually so far since we set up. I’m aware that various changes are set to come in soon but could you please summarise what we need to be preparing for?
A:You’re right to be thinking about this now, with only about six weeks to go (at the time of writing) before changes to NI take effect on 6 April 2025. Rachel Reeves, the Chancellor, announced various new measures at her first Budget in October, with a rise to employers’ National Insurance being among the headline changes. Despite the outcry from businesses, it doesn’t look likely that the Government will shift on this policy before April, even though we are set to hear from the Chancellor at the end of March for the Spring Statement.
The main details you need to know about contribution rate increases are as follows:
- Employer Secondary Class 1 National Insurance contributions rate will rise to 15%. In 2024/25 it was slightly lower, at 13.8%.
- Associated Class 1A and 1B National Insurance contributions rates on expenses and benefits given to employees are also increasing to 15%.
You also should be aware of the fact that the secondary threshold for employers’ NI liability is set to go down. This threshold – the point at which employers start to pay employers’ NI on an employee’s salary – is decreasing from £9,100 to £5,000 per year.
So that means that employers must start to pay employer NI where staff earn £5,000 a year or more. Plus, you need to report these payments to HMRC.
For any businesses about to start paying employers’ NI for the first time, they will have to register with HMRC to use payroll software through PAYE.
Very importantly, and more positively for businesses like yours, changes are also afoot for The Employment Allowance, which cuts down the amount you must pay in employers’ NI. As of April 6, the EA will increase from £5,000 to £10,500.
Although not relevant for you at the moment, it’s worth noting that the Government has also decided to remove the existing £100,000 threshold. So, businesses with employers’ NI bills above that level will be able to claim now for the first time.
If you’d like any further help or guidance on NI, Employment Allowance or payroll, please give our team a call.
