National Insurance Contributions (NICs) Changes
From 6 April 2025, the following changes to employer NICs will take effect:
- Employer NICs Rate Increase: The rate will rise from 13.8% to 15%, further increasing employment costs.
- Secondary Threshold Reduction: The threshold at which employers begin paying NICs will decrease from £9,100 to £5,000 per year.
- Employment Allowance Enhancement: The maximum Employment Allowance will increase from £5,000 to £10,500, offering eligible employers relief in full or part against their NICs bill.
Due to the increase in the Employment Allowance, some smaller businesses will pay less Employers National Insurance next year
For example, if you
- run your practice through a limited company and pay yourself £12,570 director salary
- employ 3 full time staff on the new national living wage (see below)
you will have no Employer’s NICs to pay.
Example: Employee Annual Salary: £24,000
NICs Calculation for 2025-2026:
- Secondary Threshold: £5,000 per year
- Earnings Above Threshold: £24,000 – £5,000 = £19,000
- Employer NICs Rate: 15%
- Employer NICs Due: £19,000 × 15% = £2,850
Comparison with 2024-2025:
- Previous Secondary Threshold: £9,100
- Previous Employer NICs Rate: 13.8%
- Earnings Above Previous Threshold: £24,000 – £9,100 = £14,900
- Employer NICs Due (2024-2025): £14,900 × 13.8% = £2,056
Impact of Changes, if no Employment Allowance is available:
- Increase in Employer NICs: £2,850 – £2,056 = £794
National Minimum Wage and National Living Wage Increases:
Effective from 1 April 2025, the National Minimum Wage (NMW) and National Living Wage (NLW) rates will rise as follows:
- National Living Wage (age 21 and over): Increases to £12.21 per hour, a 6.7% rise.
- 18-20 Year Old Rate: Rises to £10.00 per hour, marking a 16.3% increase.
- 16-17 Year Old and Apprentice Rate: Both see an 18.0% uplift to £7.55 per hour.
Its a good idea to check all your team’s salaries before the start of April, to make sure they comply with minimum wage requirements.
If you operate a salary sacrifice for any reason, their salary after sacrifice must be equal to or above the amounts detailed above. A salary sacrifice is where you reduce an employee’s salary in return for another benefit, such as pension contributions.
