With the Employer NI contribution changes from April 2025 fast approaching, it is vital to understand how these changes will impact your staff costs. Employer national insurance contributions are increasing by 1.2% from 13.8% to 15%, whilst the threshold above which employer contributions are paid is decreasing from £9,100 to £5,000. The national insurance allowance, is however, increasing from £5,000 to £10,500 which may benefit small employers with just a few staff members.
Financial Impact of the National Insurance Changes
The financial impact of the national insurance changes for an employee earning £35,000 a year, is an additional employment cost of £925. This breaks down as follows:
Reduction in Threshold
The threshold above which employers pay national insurance contributions (NIC) on an employee’s salary is decreasing from £9,100 to £5,000. The reduction in threshold means NIC is payable on an extra £4,100 a year. At 15%, this is an extra £615.
Increase in the Percentage Rate
The increase in the percentage from 13.8% to 15%, results in an extra £310in NIC. Together, these two changes increase the contributions by £925 a year.
Increase in the National Insurance Allowance
The increase in the National Insurance Allowance from £5,000 to £10,500 should benefit small employers with a few staff members earning the minimum wage. For large employers the increase will be insignificant when compared with the total increase in NIC resulting from the combined impact of the 1.2% increase and threshold reduction.
Illustrations
The charts below illustrate the impact of the employer NI contribution changes from April 2025, for small and medium size businesses.
In this example, there are 4 staff members each earning £24,000 a year. While the NIC changes increase the total NIC due, the increase to the NI allowance reduces the overall NI liability by £2,324 from £3,224 to £900.
| Tax year 24/25 | Tax year 25/26 | |
|---|---|---|
| NIC per employee | £2,056 | £2,850 |
| Total NI | £8,224 | £11,400 |
| Less NI Allowance | £5,000 | £10,500 |
| Total NIC due | £3,224 | £900 |
In the following example, the employee salary is £35,000 (this is around the UK average) and the figures are based on a headcount of 25 employees. The additional cost to the employer in this example is £17,650 or £706 per staff member.
| Tax year 24/25 | Tax year 25/26 | |
|---|---|---|
| NIC per employee | £3,574 | £4,500 |
| Total NI | £89,350 | £112,500 |
| Less NI Allowance | £5,000 | £10,500 |
| Total NIC due | £84,350 | £102,000 |
It is important to note that not all employers are eligible to receive the national insurance allowance. You can check your eligibility on HMRC’s website: Employment Allowance: What you’ll get – GOV.UK
