Businesses count the cost of increases to Employers National Insurance

As has been widely expected in the last few weeks, the Chancellor, Rachel Reeves, made some significant changes to the Employers National Insurance (NI) rate and threshold in the Autumn Budget.


From 1 April 2025, the rate for Employers National Insurance (NI) will increase from 13.8% to 15%. At the same time, the level at which employers start paying national insurance on each employee’s salary will be reduced from £9,100 per year to £5,000. The combination of these two changes means a potentially significant increase in payroll costs for businesses.


To counteract this, the employment allowance will be increased from its current £5,000 to £10,500. The Chancellor claimed that this would mean that “865,000 employers won’t pay any National Insurance at all next year and over 1 million will pay the same or less than they did previously.”


An employer who employs 4 full time (35 hours per week) employees at the National Living Wage rate will not have to pay NI on their wages.


However, there is some encouraging news for larger businesses. Previously the Employment Allowance could only be claimed by an employer if their Employers NI liability was less than £100,000 in the tax year. This restriction will be removed and mean that all employers that otherwise qualify will be able to reduce their national insurance liability by £10,500.


Businesses planning their headcount and budgeting payroll costs for next year will want to factor in the increased national insurance costs. If you need any help with doing this, please do not hesitate to give us a call.


See: https://www.bbc.co.uk/news/articles/c4g7x6p865zo