National Insurance & Employment Allowance Changes – April 2025

How the 2025 National Insurance and Employment Allowance Updates Affect Your Business

From April 2025, significant changes to National Insurance contributions (NICs) and the Employment Allowance will impact UK businesses. Whether you’re a small business owner or managing a larger workforce, understanding these updates is crucial to staying compliant and managing payroll costs effectively.

Key Changes to Employer National Insurance Contributions (NICs) in 2025

Employer NIC Rate Increase
- The employer NIC rate will rise from 13.8% to 15%.
- This means businesses will pay more in National Insurance on employee earnings above the threshold.
Lower Employer NIC Threshold
- The secondary threshold (the point where employers start paying NICs) will drop from £9,100 to £5,000 per year (£96 per week or £417 per month).
- As a result, employers will begin paying NICs on a lower level of employee earnings.

Employment Allowance 2025: Increased Support for Small Businesses

The Employment Allowance, which helps small businesses reduce their NIC bill, is being enhanced:

Employment Allowance Increase
- The maximum allowance will rise from £5,000 to £10,500 per year.
- This allows businesses to offset more of their employer National Insurance costs.
Expanded Eligibility
- The previous £100,000 employer NIC cap is removed, meaning more businesses can claim the allowance.

What These Changes Mean for Your Business

Higher National Insurance costs: Businesses will pay more in employer NICs due to the increased rate and lower threshold.
Greater financial relief: The boosted Employment Allowance will benefit small businesses by significantly reducing NIC liabilities.
Payroll adjustments needed: Employers should review payroll and cash flow to accommodate these changes.

How to Prepare for the 2025 NIC & Employment Allowance Changes

To ensure compliance and optimise your tax position:

✔ Review your payroll software to reflect the new thresholds and NIC rates.
✔ Check if your business qualifies for the higher Employment Allowance.
✔ Consult an accountant to explore strategies for reducing National Insurance costs.

At Hiclass Accounting, we specialise in helping UK businesses navigate tax and payroll changes. Contact us today for expert guidance on the 2025 NIC updates and how they affect your business.