Significant changes were outlined in the recent Budget concerning the Employer National Insurance Contributions (NIC), the reduction of the ‘Secondary Threshold’ (ST) as well as Employment Allowance adjustments.
Starting in April 2025, and compounded by the increase to the National Minimum Wage and National Living Wage, these changes could have a significant impact on the cost of employment for many small businesses.
The new rates will see employers pay national insurance contributions (NIC) on an employee’s earnings above £5,000 at the rate of 15%. These changes see the rate of NIC increased as well as the Secondary Threshold (ST) being decreased from £9,100 to £5,000.
To try and help protect qualifying smaller employers from the increase in NIC, the amount of the employment allowance will be increased from £5,000 to £10,500 per year from 6 April 2025. Qualifying large employers will be helped by the removal of the £100k limit, allowing them to now potentially benefit from employment allowance.
However, from the calculations we have already undertaken for clients the increase of the employment allowance is not going far enough to mitigate the increased NIC contributions and this will be an increased cost to the business.
We understand this can be a difficult time to be an employer. Whilst the changes may seem straightforward, this is not just a simple calculation to understand the full impact on your business. Employee salary levels, eligibility for Employment Allowance, and individual circumstances will all play a part in these calculations.
We would recommend reviewing your wage payments ahead of April 2025 to understand the impact of this additional tax on your business.
