From the beginning of the new Tax Year (6th April 2025), many UK businesses will face rising costs related to employing their team due to changes to Employer National Insurance Contributions (Employer NICs) and Employment Allowance (EA). Let’s examine what’s changing and what you can do now to prepare.

Employer NIC Rate and Threshold changes

With the Employer NIC rate increasing from 13.8% to 15% and the secondary threshold (the earnings level above which employers start paying NIC) falling from £9,100 to £5,000 per year, employers will pay more NIC on more of their employees’ earnings.

In practical terms, this means the cost of employing staff will increase, especially for businesses with lower-paid or part-time workers.  

Employment Allowance Increases

To offset some of the impact of these changes for smaller businesses, the government is doubling the EA from £5,000 to £10,500.  This is the equivalent of an increase of £416.66 per month to £875 per month, so if your Employer NICs are below these figures, you’ll pay no Employer NICs at all.  If they are above, you’ll be able to offset your Employer NICs until you use up the full allowance. 

The government is also scrapping the £100,000 total NIC cap for larger employers, so more businesses can qualify for the allowance.

How Employers Can Prepare

It’s all very well understanding the updates, but let’s have a look at some practical things you can do to make sure you’re ready for them:

1. Review Your Payroll/Employee Plans

It’s time to calculate how the 15% NIC rate, the lower threshold, and the increased EA will impact your costs for the 25/26 tax year.

2. Salary Sacrifice

If you are not already using salary sacrifice schemes like pension contributions via salary sacrifice, cycle to work or electric car leases, they might be worth considering, as they reduce gross pay (and therefore NIC liabilities) and offer valuable benefits to staff at the same time.

3. Group Companies

If you run a group of companies (or companies with shared ownership), only one company can claim the allowance, so make sure you choose the entity where the savings will make the most significant impact.

4. Call Winchester Bourne

These changes could significantly impact your cash flow, staffing plans and/or reward strategy.  If you’re unsure how these could affect your business, please call Winchester Bourne on 01962 715671 or email [email protected]