From 6 April 2025, changes to employer National Insurance Contributions (NICs), as well as increases to the National Minimum Wage (NMW), will take effect.
For many employers, this will mean significantly higher costs associated with employing staff, and so, if you are likely to be affected, it is advisable to prepare for the financial impact that this could have on your business.
National Insurance Contributions (NICs)
There are two key things to consider, when it comes to NICs; firstly, that the point at which employers will begin to pay contributions will be significantly lower and, secondly, that the rate at which the contributions are paid will increase.
From April 2025, employers will pay secondary Class 1 NIC at a rate of 15%, up from 13.8%.
In addition, the threshold at which employers must start to pay these contributions will be lowered from £9,100 per year, to £5,000 per year, which will draw more employees into calculations.
National Minimum Wage (NMW)
The table below shows the NMW rates from 6 April 2025 which, combined with the frozen tax rate thresholds, will result in many more employees reaching the £5,000 threshold for NICs.
| 21 and over | 18 to 20 | Under 18 | Apprentice | |
| Current | £11.44 | £8.60 | £6.40 | £6.40 |
| From 6 April 2025 to 5 April 2026 | £12.21 | £10.00 | £7.55 | £7.55 |
How will this affect your business?
In an attempt to alleviate the burden faced by many employers as a result, the Government has confirmed that the Employment Allowance will be increased from £5,000 to £10,500 for eligible businesses, and that the £100,000 cap will be removed.
In theory, this means that the relief available will not only be more than doubled, but that more businesses will be eligible to claim.
However, despite these provisions, many businesses are still going to feel the pinch when April arrives.
Increased employment costs will put a strain on cash flow for some employers, who may need to make adjustments to payroll budgets as a result, whilst those with the largest payroll bills will only have access to limited relief.
With these changes fast approaching, you should already have an idea of how your payroll costs will be affected, and how you can manage the financial impact on your business going forward.
Do not let these changes catch you off-guard. Contact us today for advice on financial forecasting, payroll planning, and exploring tax efficiencies.
