Significant changes to employer National Insurance (NI) contributions, announced in the Autumn Budget of 30 October 2024, are set to take effect in the 2025/26 tax year, with implications that could substantially affect employer costs. Our payroll team at Rayner Essex has analysed these changes to help you understand their impact and plan effectively. Below, we provide an overview of these changes and their potential financial effects on employers.
Key Changes to Employer National Insurance Contributions
1. Reduction in the Secondary NI Threshold
The secondary NI threshold, the amount employees can earn before employers start paying NI, will decrease from £9,100 to £5,000 from April 2025. This reduction is expected to significantly increase employer costs:
- Extra Cost Per Employee: £615
2. Increase in Employer NI Rate
The employer NI contribution rate will rise from 13.8% to 15%, starting from April 2025. This increase will result in:
- An additional 1.2% NI rate will apply to all earnings above the threshold of £9,100.
- Employers should also consider increased costs for Class 1A NI on taxable benefits.
- Employers should also be mindful of increased costs of Class 1B NI on PAYE settlements.
3. Enhanced Employment Allowance
To support small businesses, the employment allowance will increase from £5,000 to £10,500. This change is effective from 6th April 2025. Note that the £100,000 NI threshold applicable in the 2024/25 tax year has been removed. Further guidance on eligibility will be provided in April 2025.
Get in Touch
The upcoming changes to employer National Insurance contributions represent a significant shift in employer obligations. By understanding these adjustments and preparing early, you can better manage your financial planning for the 2025/26 tax year. Should you have any questions or require assistance in assessing your specific situation, our payroll team is here to help.
For further details, please get in touch with our payroll services team for tailored advice or sign up to our latest news to explore our insights and stay updated, to ensure your business is ready for these and further changes.
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