What Changed?
From 6 April 2025, employer National Insurance Contributions increased significantly as part of the Autumn Budget 2024 announcements:
- The employer NIC rate rose from 13.8% to 15%
- The secondary threshold (the earnings level at which employer NIC applies) fell from £9,100 to £5,000
Both changes together mean employers pay NIC on a wider band of each employee's salary, at a higher rate.
How Much More Will It Cost?
For an employee earning £30,000 per year, the annual employer NIC cost increases from approximately £2,884 to £3,750 — an increase of around £866 per employee.
For higher-earning employees, the impact is even greater. A business with 10 employees on average salaries of £30,000 could face an additional £8,000–£10,000 in NIC costs each year.
Employment Allowance — Increased Relief
To partially offset the impact on smaller businesses, the Employment Allowance was increased from £5,000 to £10,500. This allowance reduces your employer NIC bill and is available to most small businesses with employer NIC bills under £100,000 in the previous tax year.
If your total employer NIC bill is less than £10,500, you may pay no employer NIC at all.
Impact on Different Business Types
Small Businesses (under 5 employees)
Many will be protected by the increased Employment Allowance. Review whether you now qualify for full relief.
Medium Businesses (5–50 employees)
Will see a meaningful increase in payroll costs. Consider reviewing your workforce structure and pricing.
Limited Company Directors
The optimal salary/dividend split has changed. Taking a salary just above the secondary threshold (£5,000) may no longer be optimal. We recommend a personalised review.
Strategies to Consider
- Salary restructuring — Review the optimal salary level for director-shareholders
- Benefits in kind — Consider offering non-cash benefits such as electric vehicles, pension contributions, and health insurance
- Employment Allowance — Ensure you are claiming this if eligible
- Pension salary sacrifice — Employee pension contributions via salary sacrifice reduce both employee and employer NIC
- Pricing review — Consider whether increased labour costs need to be reflected in your pricing
Action Points
Now is the time to review your payroll strategy. Contact Ascot Accountancy to arrange a payroll and remuneration review tailored to your business.