The 2025 changes to Employer’s National Insurance Contributions (NIC) introduce higher costs for UK businesses, impacting payroll, hiring, and budgeting. This guide covers the essential updates and offers practical steps to help you adapt.
Key Changes to Employer’s National Insurance in 2025
1. Increased Secondary Class 1 NIC Rate and Adjusted Thresholds
Rate Increase: From April 2025, the rate for Secondary Class 1 NIC will rise from 13.8% to 15% on earnings above the Secondary Threshold (ST).
Threshold Reduction: The ST will decrease to £5,000 annually (or £96 weekly), up from £9,100, increasing NIC liability for most employers.
Revenue Impact: The government expects the changes to raise £25 billion annually, with potential adjustments in wage growth as a result.
2. Expanded Employment Allowance
The Employment Allowance will increase from £5,000 to £10,500 per year, effective April 2025, offering smaller businesses relief by reducing NIC liabilities.
Eligibility Update: The removal of the £100,000 cap means more businesses can benefit, making it an essential relief option for SMEs facing increased NIC costs.
3. Class 1A & 1B NIC Rate Increase and BIK Payrolling
Both Class 1A and 1B NIC rates will increase to 15% in April 2025. Additionally, most benefits in kind (BIK) will require mandatory payrolling starting April 2026, phasing out traditional P11D forms.
Practical Steps for Businesses
To manage these NIC increases, consider the following:
Revise Financial Plans: Update budgets to reflect higher NIC costs and align hiring and wage strategies.
Maximize Employment Allowance: Ensure your business claims the increased allowance to offset NIC liabilities, especially if you qualify under the updated eligibility.
Prepare for BIK Payrolling: Get familiar with payrolling benefits in kind to ensure a smooth transition in 2026, or start voluntary payrolling sooner if practical.
Seek Expert Guidance: Consulting a payroll or tax advisor can provide tailored solutions for adjusting to the NIC changes and optimizing your payroll strategy.
Need Help? Contact Us
If you need assistance or would like more detailed guidance on adapting to these 2025 NIC changes, please feel free to contact us. Our team is here to help you navigate these updates and develop a strategy that best suits your business needs.
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