National Insurance Contributions (NICs) are the UK’s second-biggest tax and are anticipated to raise nearly £170 billion in 2024-25 (the Institute of Fiscal Studies, 2025). On 6 April 2025, the ‘Secondary Class 1’ employer’s national insurance contributions will rise from 13.8% to 15%, and the threshold at which it is paid was reduced to £5,000 from £9,100.
The increasing Employers National Insurance Contributions will create several challenges for small businesses, including charities and not-for-profits. Additional pressures will come from increasing operating and staff costs in other areas, such as statutory payments and the National Living Wage rising to £12.21.
However, this is countered by an increase in the Employment Allowance from £5,000 to £10,500. Additionally, the £100,000 restrictions at which this relief stopped will be removed, meaning that even large employers can claim the allowance.
However, it is possible that savings can be made through some salary sacrifice arrangements. Utilising salary exchange schemes, employees can ‘sacrifice’ a proportion of their salary in return for a non-cash benefit, for example, a cycle/bike-to-work scheme, and by changing your workplace pension to a salary sacrifice scheme.
The UK government estimates that these rising costs will impact 1.2 million employers, so we know it is not only big organisations that will be affected. However, the impact on individual employers will depend on their workforce and the rise in NI liability.
If you need advice on navigating increasing employers’ national insurance contributions or other payroll changes, speak with our dedicated team today. Contact us here.
