If you are an employer, you currently pay secondary Class 1 National Insurance contributions (usually referred to Employer’s NI) on the earnings of all employees above the “secondary threshold” currently (2024/25) set at £9100.
Changes to National Insurance rates in April will mean the cost of employing staff are set to increase, due to the joint effect of increases to the Employer NI rate and the lowering of the secondary threshold of national insurance.
What are the changes?
- Employer’s National Insurance Contributions (NICs) will rise from 13.8% to 15%
- And the Secondary threshold (the threshold when Employer’s NI is triggered) will reduce from £9100 to £5000
What do these changes mean for businesses?
- Even if you only have one employee on the payroll, if that employee is paid over £5000 in a tax year you will now start to pay Employer’s NI from April.
- All employees paid over £5000 will trigger Employer’s NI
- These changes will inevitably increase employment costs for businesses, however, to help minimise the impact on smaller businesses the Employment Allowance will increase from £5000 per annum to £10,500 from April. This allowance will mean that each month your total Employer’s NI liability will be reduced up to a total allowance of £10, 500, helping reduce your overall PAYE liability.
- In the current 24/25 tax year the Employment Allowance is only open to those with an Employer’s NI liability of less than £100k – however from April this restriction will be removed. There are other restrictions that still apply to Employment Allowance so please reach out to us if you want to find out if you are eligible.
- Something to consider, with the increase in Employer NI rates, are the potential benefits of opting for salary sacrifice schemes, such as pensions.
If you want to discuss how these changes affect your business, please get in touch.
