From 6 April 2025, some important changes to Class 1 National Insurance Contributions (NICs) and the Employment Allowance will come into effect. These updates will affect employers across the UK, so it’s vital to understand what’s changing and how it might impact your business. Let’s break it down in plain English.
What’s Changing?
1. Lower Secondary Threshold
At the moment, employers only start paying secondary Class 1 NICs on employee earnings over £9,100 a year. But from April 2025, this threshold will drop significantly to £5,000 a year.
What does this mean for employers?
- You’ll be paying NICs on a bigger chunk of your employees’ wages, which will increase your overall NIC bill.
- For businesses with lots of staff or those on tighter budgets, this could have a noticeable impact.
2. Higher Secondary NICs Rate
The rate of secondary Class 1 NICs is going up too. Currently, employers pay 13.8%, but this will rise to 15% in April 2025.
How will this affect your business?
- It’s a straightforward increase—more of your payroll costs will go towards National Insurance.
- Larger employers or those with higher-paid staff might feel the pinch more than smaller businesses.
3. Boost to Employment Allowance
Here’s some good news: the Employment Allowance, which reduces the amount of NICs smaller employers have to pay, will increase from £5,000 to £10,500.
What’s the benefit?
- If your business qualifies, you’ll get a bigger break on your NIC bill.
- This extra allowance could help balance out some of the additional costs from the other changes.
4. More Businesses Eligible for Employment Allowance
At the moment, if your business’s NIC bill is more than £100,000 a year, you can’t claim the Employment Allowance. From April 2025, that limit will be scrapped, which means more businesses will be able to qualify.
Why does this matter?
- Larger employers who couldn’t previously benefit from the allowance may now see a reduction in their NIC liabilities.
- This is great news if your business has grown and previously lost access to this valuable relief.
What Does This Mean for Employers?
These changes will have different effects depending on the size of your business and your workforce. Here’s how you can get ahead:
- Plan for Higher NIC Costs: The lower threshold and higher rate mean most businesses will see their NIC bills go up. Start reviewing your payroll budgets now to factor in these changes.
- Make the Most of the Employment Allowance: If you’re eligible, the increased allowance will be a big help. Double-check your entitlement, especially with the eligibility threshold being removed.
- Seek Professional Advice: The updates might feel like a lot to navigate, but with the right guidance, you can manage the impact and take advantage of any available reliefs.
How ISA Consortium Can Support Your Business
At ISA Consortium, we’ve been helping UK businesses with their tax and accounting needs for over a decade. Whether you’re a small business looking to maximise your Employment Allowance or a larger employer planning for these NIC changes, our team is here to help.
We offer tailored advice to make sure you stay compliant, minimise your NIC liabilities, and plan effectively for the future. Don’t face these changes alone—let us take the stress out of your tax and accounting needs.
Get in touch today to find out how we can support your business through these updates and beyond.
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