From 6 April 2025, businesses across the UK will see significant changes to employer National Insurance Contributions (NIC) — changes that could impact everything from cash flow to hiring plans.
What’s Changing?
Two key updates are on the horizon:
- The employer NIC rate will rise from 13.8% to 15% on Class 1 (secondary) contributions.
- The secondary threshold — the point at which employer NIC becomes payable — will fall from £9,100 to £5,000 per year.
This means employers will pay NIC on a greater portion of employees’ earnings, including many part-time and lower-paid roles.
To help soften the blow, the government has increased the Employment Allowance from £5,000 to £10,500, while also scrapping the £100,000 prior-year NIC cap — opening the door for more small to medium businesses to benefit.
Why Does This Matter?
In short: higher costs for employers.
- The new 15% rate means every pound earned above the £5,000 threshold costs you more.
- The lower threshold pulls more of your team’s wages into NIC liability — including employees who previously sat below the old limit.
For context, a typical full-time employee on around £36,000 a year could cost an employer an extra ~£938 annually in NICs before applying any allowances. Scale that across a team, and the numbers soon add up.
Many businesses are already responding by reviewing their staffing, pricing, and expansion plans.
What You Can Do Now
- Review Employment Allowance eligibility While the allowance has increased to £10,500, not all businesses can claim it. For example, if you employ someone for domestic or personal work (like a nanny), or if you’re a public body or do public work, you may not qualify. It’s worth checking carefully — or better yet, let your adviser do it.
- Update your payroll systems Make sure your software and processes are ready for:
- The £5,000 secondary threshold
- The 15% NIC rate
- The increased allowance where applicable
- Revisit staffing and budget forecasts Assess how these changes affect your wage bill and recruitment plans — and consider their impact on your pricing strategy.
- Look at payroll efficiencies Consider salary sacrifice schemes, automation, or restructuring hours where appropriate — these can help offset rising costs without cutting headcount.
- Upskill your team Ensure whoever manages your payroll understands the new rules — small mistakes could mean unnecessary costs or even HMRC penalties.
In Summary
Yes, these changes represent a real shift for employers — but with smart planning, up-to-date systems, and full use of available reliefs, businesses can manage the impact without stalling growth.
If you’d like a second opinion on your payroll setup — or help checking your Employment Allowance eligibility — the team at Thorne Widgery is ready to help. Drop us a message for a no-pressure chat.