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What do the new National Insurance rules mean for employers?
Employing staff involves more than just paying their wages; employers also pay National Insurance (NIC) on wages, which increases the overall cost of employment.

The amount of NIC that is due to HMRC depends on the number of employees, how many hours they work and their rate of pay.

The current rate of employer NIC is 13.8%, but this is only due if an employee earns more than £175 per week, which equates to £9,100 per year.

However, from 6 April 2025 the employers’ NIC rate is increasing from 13.8% up to 15%, with contributions starting at a lower threshold of £96 a week, or £5,000 per year, meaning many employers will see their NIC bill rise.

What is the position now?
If for example, you have an employee who in the current 2024/25 tax year earns £20,000, your employer’s NIC bill for that employee will amount to £1,504 (£20,000 – £9,100 = £10,900 x 13.8% = £1,504).

What will the position be from 6 April 2025?
Using the details above, your NIC bill under the new rules will be £2,295 (£20,000 – £5,000 = £15,000 x 15% = £2,250); an increase of £746.

How will the increase in the Employment Allowance from 6 April 2025 affect me?
The Employment Allowance (EA) currently gives businesses a £5,000 NIC credit if their employers’ NIC bill in the previous tax year was less than £100,000.

From 6 April 2025, the EA will increase up to £10,500 and businesses will be able to claim this regardless of the size of their NIC bill in the previous year.

If under the new rules from 6 April 2025 your employer’s NIC bill is less than £10,000, you will not have an employer’s NIC payment to make and will be unaffected by the new rates.

If however your employer’s NIC bill under the new rules exceeds £10,000, you will only pay the excess.

Whether or not the increased NIC rate and lower threshold will impact you from 6 April 2025 will depend on the number of employees you have, how many hours they work and their rate of pay.

If, for example, you have three employees aged 21 or over, who work full time on £12.21 an hour (National Living Wage), then your total employer’s NIC bill will fall under the £10,500 new EA and no employer’s NIC payment would be due. (37.5 hours x £12.21 rate x 52 weeks = annual salary of £23,809. The employer’s NIC due on this would be £23,809 – £5,000 x 15% = £2,821. The amount due for three similar employees would therefore be £8,463, which is less than the increased EA).

If however you had four similar employees, then the employer’s NIC bill would amount to £11,284 (4 x £2,821). £10,500 of this would be covered by the increased EA and you would only be required to make payment for the balance of £784.

The make-up of your workforce will dictate by how much the new rules are going to impact on your employer’s NIC bill, but there is no doubt that for many employers this will be an extra cost that they simply cannot afford to carry.

Should you have any questions or would like to speak to one of our payroll team regarding your likely exposure from April of next year, please do not hesitate to contact us on 01228 711888, 01387 270340 or email mail@david-allen.co.uk