The Chancellor announced significant changes to employers’ National Insurance contributions (NICs) and the Employment Allowance, set to take effect from 6 April 2025. These adjustments attempt to balance the need for significant revenue generation with some further support for smaller businesses.
Starting in April 2025, the rate of employer NICs will rise from 13.8% to 15%. Despite this hike, the UK’s total revenue from employer Social Security Contributions and payroll taxes will remain below the OECD average and the third lowest in the G7, trailing behind France, Italy, Germany, and Japan.
The threshold at which employers become liable to pay NICs, known as the Secondary Threshold, will be reduced from £9,100 to £5,000 per employee. This change means that employers will start paying NICs at a lower level of employee earnings.
To mitigate the impact on smaller businesses, the Government is increasing the Employment Allowance. Currently, this allowance provides a £5,000 discount on NICs bills for employers with NICs liabilities of £100,000 or less. From next year, the allowance will be raised to £10,500 and additionally, the £100,000 eligibility threshold for the Employment Allowance will be removed.
The increase in headline NIC rates will be significant for many organisations but the Government estimate that more than half of employers with NICs liabilities will either see no change or will benefit overall next year.
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