The increase in National Insurance Contributions (NICs) for employers that was announced in the 2024 Autumn Budget is due to take effect in a few months – from 6th April 2025.
The three primary changes to employer NICs include:
- Cutting the starting point for payment from £9,100 to £5,000
- Increasing the employer’s rate from 8% to 15%
- Boosting the employment allowance from £5,000 to £10,500
While the greater employment allowance will act as an NIC credit that can help employers to reduce their liability, the payment threshold reduction will raise lots more revenue for the Treasury – and is the largest concern for retail, leisure, and hospitality businesses.
Under the new rules, the NIC cost of employing a part-time worker earning £175 per week goes up from zero to £11.85 per week. That’s before the National Living Wage increase of 6.7%, too.
It’s easy to see why UK businesses aren’t happy with this part of the Budget, but the impact of these changes to NICs won’t only affect employers in 2025.
How will rising NICs affect you?
The Office for Budget Responsibility (OBR) predicts that employers could react to higher NICs by reducing working hours, restricting pay rises, or cutting down on recruitment.
As NICs for self-employed workers now have a maximum rate of 6%, more individuals may consider working as one-person companies. However, this is contentious, as there has been plenty of recent litigation over the line between being an employee and a contractor.
For those who are already self-employed, the appeal of incorporating on tax grounds has decreased due to the rise in NICs – weakened further after previously increased dividend tax.
Employees, whose starting point for paying employee NICs remains at £12,570, may see indirect benefits like new or improved salary sacrifice schemes, which can save employers money by passing NICs to employees through pension contributions or company cars.
More information about the employer NIC changes can be found on the government website.
Need advice on NICs in 2025?
Whether you’re an employer, an employee, or self-employed, you’ll need to make sure that all your payroll and tax systems are up to date and compliant in time for the new tax year.
If you need help with managing National Insurance Contributions, or you’re looking for any other account management and HMRC liaison services, you’re in the right place.
Here at gbac, our accountants in Barnsley provide a wide range of bookkeeping and tax management services, so don’t hesitate to contact us to discover what we can do for you.
Simply call us on 01226 298 298 or send an email to info@gbac.co.uk and we’ll be in touch.