The UK government has introduced significant changes to employer National Insurance contributions (NICs) in the 2024 Autumn Budget. These updates, effective from 6 April 2025, are set to impact businesses of all sizes, particularly small and growing ones. Here’s a breakdown of the key changes and what they mean for your business.
1. Increase in Employer NIC Rates
The primary rate of secondary Class 1 NICs will rise from 13.8% to 15%, marking a 1.2% increase. This change also applies to Class 1A and Class 1B employer NIC rates, aligning them with the revised rate.
2. Reduced Secondary NIC Threshold
The threshold at which employers begin paying Class 1 NICs will decrease from £9,100 to £5,000 per year. This change will remain in place until April 2028, after which the threshold will increase annually in line with the Consumer Price Index (CPI).
3. Enhanced Employment Allowance
To offset some of these cost increases, the Employment Allowance will rise from £5,000 to £10,500, benefiting a broader range of businesses. Notably, the £100,000 employer NIC liabilities cap for eligibility will be removed, allowing all qualifying businesses to take advantage of the increased allowance.
How These Changes Impact Small and Growing Businesses
Increased Employer Costs
For small businesses, the reduced NIC threshold and increased rates mean higher costs for employing staff. Even without giving pay raises, the rise in NICs and the national minimum wage will contribute to increased payroll expenses.
Support Through Employment Allowance
The higher Employment Allowance offers some relief, enabling more small businesses to eliminate their NIC liabilities entirely. Government figures estimate that 865,000 employers will pay no NICs next year due to this allowance increase.
Planning for the Future
To navigate these changes, small businesses should:
- Evaluate Workforce Costs: Adjust budgets to account for higher NIC rates and thresholds.
- Utilise Allowances: Ensure eligibility for the increased Employment Allowance to maximise savings.
- Stay Updated: Monitor annual CPI-linked threshold changes and plan accordingly.
How The Infinity Group Can Help
Navigating these changes can be complex, but you don’t have to do it alone. At The Infinity Group, we specialise in payroll and compliance services tailored to meet HMRC regulations. Our expert team is here to help your business stay compliant and thrive amidst changing regulations.