Rising business costs are becoming a regular topic of conversation. And with the latest National Insurance increase, it’s understandable that you want to prepare.
The amount of National Insurance (NI) paid by employers rises on April 6 2025. Find out how much and what these additional costs mean for your business.
How much is employers’ National Insurance rising?
As of April 6 2025, the Employer National Insurance Contribution (NICs) rate will increase from 13.8% to 15%. At the same time, the Secondary Threshold is changing from £9,100 to £5,000 per year.
So, for every £1 earned by employees above the threshold, employers now contribute 15p in NICs.
When you look at it like this, it may seem like a small change, but those extra pennies quickly stack up when you’re running payroll for multiple employees over several pay periods. To put things into perspective, here’s a quick comparison of the previous and new Employer National Insurance rates and thresholds.
| Change | Up to April 5 2025 | From April 6 2025 |
| Employer National Insurance Rates | 13.8% | 15% |
| Secondary Threshold | £9,100 per year | £5,000 per year |
| Employment Allowance | £5,000 per year | £10,500 per year |
| Employment Allowance Cap | £100,000 annual NICs liability | Removed |
Who does the NI increase affect?
This increase directly affects businesses, particularly small and medium-sized enterprises (SMEs), that employ staff earning over £5,000 per year. The increased Employer NI rates, combined with the lowered earnings threshold, act as a double hit, resulting in higher costs and possible cash flow challenges.
If you’re in a labour-intensive industry, like hospitality, retail, care, or construction, payroll is likely to make up a large portion of your overheads. These sectors will likely feel the pinch more acutely.
Want to see how the numbers stack up for your business? Use our National Insurance Calculator to estimate your increased NIC costs.
Can businesses offset the NI increase?
While the National Insurance rise presents financial pressures for growing businesses, there are ways to offset costs. The most effective is the Employment Allowance, which thankfully allows eligible businesses to reduce their employer NICs by up to £10,500 a year.
Another silver lining is that the government has also removed the £100,000 cap on the allowance. This means that eligible businesses and charities can reduce the NI burden and utilise the Employment Allowance regardless of what their Secondary Class 1 National Insurance Contributions liabilities were in the previous tax year.
How does the National Insurance rise affect businesses?
Increased costs
The most apparent impact of the National Insurance increase is the rise in employment costs and payroll expenses. Depending on your team’s size and payroll setup, you could be looking at paying hundreds, if not thousands, of pounds more each year.
For smaller businesses, the National Insurance rise could have a considerable effect on cash flow, especially since payroll is a major expense. Additionally, the reduction in the Secondary Threshold could mean that a larger portion of your employees’ earnings is subject to NICs.
Potential impact on employee take-home pay
While these changes don’t directly affect employee National Insurance rates, some businesses may consider holding back on wage increases and bonus payments to balance the costs. Over time, this could affect how much money staff members bring home.
It may seem like a cost-effective approach to the NIC increase, but pay rises and bonuses are incremental to employee satisfaction, especially in industries where talent retention is already challenging. It’s worth taking a proactive approach and thinking of your long-term goals as well as initial cost savings.
How to prepare your business for the NI increase
Review payroll costs and budget
- Now is a good time to take a closer look at your payroll and review budgets. Can your business absorb the additional costs, or will you need to make some adjustments elsewhere? Calculate the direct cost increase for each employee and factor in the Employment Allowance.
Make the most of your payroll software
- Let your payroll software do the heavy lifting for you. Use it to automate calculations and create reports to make financial decisions easier. Just make sure it’s up to date and shows the correct rates and thresholds for the current tax year first!
Explore salary sacrifice schemes
- Consider implementing or enhancing salary sacrifice schemes that allow employees to give up some of their salary in exchange for non-cash benefits, such as pension contributions, childcare vouchers, or cycle-to-work schemes. This reduces the amount of Income Tax and NICs that employees pay, benefiting both employer and employee.
Consider outsourcing work
- Re-think your employment strategy and consider outsourcing work to freelancers and self-employed individuals. This might work well for companies in the construction and trades industries, where work can be outsourced if necessary.
Review pricing strategies
- For many businesses, tax rises tend to result in pricing adjustments for their products or services. Consider if it’s a good time to increase prices or see if you can reduce costs with your suppliers.
Utilise employment allowance
- Make full use of the increased Employment Allowance to reduce your yearly National Insurance liability by up to £10,500 and pay less Class 1 National Insurance.
Speak to an experienced accountant! Contact Ascott Blake
We know that the rising cost of National Insurance Contributions can feel daunting, but you’re not alone.
At Ascott Blake, we stay up to date with the latest in tax and accounting to ensure our clients never have to worry. If you’re concerned about what the latest National Insurance changes mean for your business, call us on 01279 797 222 or contact us online for accounting advice that’s easy to understand.
