Budget Announcement: Employers National Insurance changes effective from April 2025.

From April 2025, the start of the next tax year, employers will face a number of changes as to how employer National Insurance (NI) contributions are calculated.

• The current rate will increase from 13.8% to 15%.
• In addition the earnings level at which this kicks in will reduce from £9,100 to £5,000 for each employee.

In an attempt to soften the blow for smaller businesses (those where the employees NIC cost for the previous tax year was £100,000 or lower), the employment allowance will more than double from £5,000 to £10,500. It will also, from April 2025, apply to all qualifying employers not just those currently defined as small for this purpose.

What might the impact be?

Other than for the very smallest of employers these NIC changes will increase costs.

For a workforce of, say, six each earning £35,000 annually (about the UK average salary) the impact will be broadly neutral with the increase in rates and reduction in thresholds being offset by the increase in employment allowance.

However, for larger employers there will be an increase in costs growing in scale as headcount and average salary increase.

For example looking at a business with, say 50 employees each earning £50,000 p.a. the increased cost to the business will be of the order of £45,000 annually.

Reducing the impact: Salary Sacrifice

One approach that should be considered to reduce the impact of these increased costs would be to implement or increase a salary sacrifice basis for pension contributions.

In the second example above, and assuming a 5% salary sacrifice for each of the 50 employees, the reduction in impact could be close to £19,000.

Whilst this can’t be forced on your workforce, it can be of benefit to both employer and employee. Reducing both tax and NI on the employee and mitigating the increase in employer costs once these budget changes are in place.

Use the form below to request more information about how these changes may affect your business and how we can help mitigate the impact:

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