Preparing for Changes in National Insurance

Navigating Upcoming Adjustments in Employer Contributions

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In the wake of the Autumn Budget announcement on 30 October 2024, significant modifications to employer National Insurance (NI) contributions are slated to commence in the 2025/26 tax year. These changes are poised to markedly influence employer expenses. Our dedicated payroll team at Mitchell Associates has meticulously reviewed these updates to elucidate their implications and aid in strategic planning. Below is a detailed summary of the adjustments and their potential financial repercussions for employers.

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Key Modifications to Employer National Insurance Contributions

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Reduction of the Secondary NI Threshold

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Commencing in April 2025, the secondary NI threshold—the earnings level at which employers begin contributing to NI—will be reduced from £9,100 to £5,000. This alteration is anticipated to substantially elevate employer expenses:

-Additional Cost per Employee: £615

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Increase in Employer NI Rate

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From April 2025, the employer NI contribution rate is set to rise from 13.8% to 15%. This adjustment will lead to:
-An extra 1.2% NI rate applicable to all earnings exceeding the £5,000 threshold.
-Employers should also account for heightened costs associated with Class 1A NI on taxable benefits.
-Additionally, increased expenses related to Class 1B NI on PAYE settlements should be considered.

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Enhanced Employment Allowance

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To assist small enterprises, the employment allowance will be elevated from £5,000 to £10,500, effective 6 April 2025. It is important to note that the £100,000 NI threshold applicable in the 2024/25 tax year has been abolished. Further guidance regarding eligibility will be available in April 2025.

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Contact Us

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The forthcoming changes to employer National Insurance contributions signify a substantial shift in employer responsibilities. By comprehending these revisions and preparing in advance, you can more effectively manage your financial planning for the 2025/26 tax year. Should you have any inquiries or require support in evaluating your specific circumstances, our payroll team is readily available to assist.

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