Employer National Insurance and Allowance Changes in 2025: What You Need to Know.

From April 6, 2025, significant changes to Employer National Insurance Contributions (NICs) and the Employment Allowance will take effect. These updates will impact how much businesses pay in employer NICs and who qualifies for allowances. If you’re an employer, understanding these changes is crucial for financial planning and payroll compliance.

In this article, I'll break down the key changes, their potential impact on businesses, and what steps employers should take to stay compliant.

Key Employer NIC and Allowance Changes in 2025

1. Increase in Employer NICs Rate

The Employer National Insurance Contribution (NIC) rate will increase from 13.8% to 15% for earnings above the Secondary Threshold.

This means businesses will need to budget for higher payroll costs, particularly for employees earning above the threshold. This increase will affect sectors with large workforces, such as retail, hospitality, and care services, where NICs make up a significant portion of overall expenses.

2. Reduction in the Secondary Threshold

The Secondary Threshold—the income level at which employers start paying NICs for an employee—will be reduced from £9,100 to £5,000 per year.

Previously, employers only paid NICs on wages above £9,100, but with this lower threshold, many businesses will see an increase in NIC payments. This particularly impacts businesses that employ part-time or lower-wage workers, as more of their earnings will now be subject to NICs.

3. Increase in Employment Allowance

The Employment Allowance, which allows small businesses to reduce their employer NICs liability, will increase from £5,000 to £10,500.

Additionally, the previous £100,000 eligibility threshold—which excluded businesses with NIC liabilities above this amount—will be removed. This means more businesses will be able to claim the allowance, potentially offsetting the impact of the NIC rate increase.

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How These Changes Impact Employers

These adjustments are part of a broader strategy to increase government revenue for public services. However, they also mean:

Higher payroll costs for businesses – Companies must account for increased NICs expenses in their budgets. Greater financial pressure on small and medium-sized businesses (SMEs) – The lower Secondary Threshold means more employers will pay NICs on lower wages. Potential hiring impact – Some businesses may reconsider new hires or salary increases due to rising employment costs. More businesses eligible for Employment Allowance – The increase in the allowance could help offset some of these costs, especially for small businesses.

What Employers Should Do Next

To prepare for these changes, businesses should take the following steps:

1. Review payroll systems – Ensure that payroll software is updated to apply the new NIC rates and thresholds correctly.#

2. Assess financial impact – Calculate how much more your business will be paying in NICs and plan accordingly.

3. Consider claiming the Employment Allowance – If your business qualifies, this could help reduce NIC liability and offset increased costs.

4. Seek professional advice – Consulting an accountant or payroll expert can help ensure compliance and identify potential cost-saving opportunities.

5. Stay informed – Regularly check HMRC updates for any further announcements or clarifications regarding these changes.

Conclusion

With the 2025 changes to Employer NICs and allowances, businesses must be proactive in understanding their financial implications. While the increase in NIC rates and the reduction in the Secondary Threshold will raise employment costs, the expanded Employment Allowance offers some relief, particularly for small businesses.

Employers should act now to update their payroll processes, adjust budgets, and explore potential savings opportunities. Staying informed and prepared will help businesses navigate these changes effectively.

Tamara Kuzminska