Employer National Insurance Changes: What Every UK Business Needs to Know

From 6 April 2025, two significant changes to employer National Insurance Contributions (NICs) came into effect. Together they represent the largest increase in employer payroll costs in decades — and every UK business needs to understand the impact.

What Has Changed?

1. The Employer NI Rate Has Risen from 13.8% to 15%

The main rate of employer Class 1 NICs increased by 1.2 percentage points — from 13.8% to 15% — on all earnings above the secondary threshold. This applies to all employers, regardless of size.

2. The Secondary Threshold Has Dropped from £9,100 to £5,000

The secondary threshold is the point at which employers start paying NICs on an employee's earnings. Previously set at £9,100 per year (£175 per week), it has been cut to £5,000 per year (£96 per week) — and will remain frozen there until April 2028.

This means employers now pay NI on a wider band of each employee's salary. For a full-time employee earning £30,000 per year, the combined effect of both changes adds roughly £865 in additional employer NI costs per year compared to 2024/25.

The Employment Allowance Has Increased to £10,500

In recognition of the increased burden on smaller businesses, the Employment Allowance — which offsets employer NICs — has been doubled from £5,000 to £10,500 per year. The previous restriction excluding businesses with a single director has also been removed, making it available to a wider group of employers.

For eligible businesses with a modest payroll, the increased Employment Allowance may fully absorb the impact of the NI rise. However, businesses with larger workforces or higher wage bills will still face a material increase in costs.

Who Is Most Affected?

• Businesses with part-time or lower-paid staff — the reduced threshold means NI now kicks in at lower wage levels, increasing costs for employers of part-time workers.
• Labour-intensive sectors — hospitality, retail, care, and cleaning businesses, where staff costs make up the majority of overheads, will feel the impact most acutely.
• Businesses ineligible for Employment Allowance — companies with a sole director and no other employees do not qualify and face the full increase.

What Should You Do Now?

These changes are already in effect, but there are steps you can take to manage the impact:

1. Review your payroll costs — run updated projections to understand the full annual impact on your business.
2. Claim the Employment Allowance — if you haven't already, confirm eligibility and ensure your payroll software is applying it correctly.
3. Consider employment structure — for new hires, model the total cost of employment including the revised NI before making decisions.
4. Speak to your accountant — salary sacrifice arrangements (for pension contributions, for example) can reduce the NI base and partly offset the increase.