The Autumn Budget has introduced notable updates to Employers’ National Insurance (NI) set to take effect on 1 April 2025, prompting businesses to revisit their payroll strategies. Here’s a breakdown of the changes and their potential implications for your business.
Key Updates to Employers’ NI
Employers will need to navigate two significant changes:
- Rate increase: The Employers’ NI rate is increasing from 13.8% to 15%.
- Threshold reduction: The annual salary threshold for Employers’ NI liability will lower from £9,100 to £5,000.
These combined changes could lead to considerable payroll cost increases for many businesses.
Government relief measures
To ease the financial impact, the government is enhancing the Employment Allowance, raising it from £5,000 to £10,500. This change is expected to provide substantial relief:
- Approximately 865,000 employers will no longer pay any Employers’ NI.
- Over 1 million businesses will see their NI costs remain unchanged or even decrease.
For example, small employers with four full-time staff members earning the National Living Wage will not be required to pay Employers’ NI on those wages.
Additionally, a major restriction has been removed. Previously, the Employment Allowance was only available to employers with less than £100,000 in Employers’ NI liability during the prior tax year. From 2025, this limitation will no longer apply, enabling larger businesses to benefit from the allowance.
Payroll costs
Despite these relief measures, payroll expenses are set to increase across the board due to:
- The higher Employers’ NI rate and lower salary threshold.
- Planned National Living Wage and Minimum Wage increases, also effective from 1 April 2025.
Implications for businesses
These changes may prompt you to:
- Reassess recruitment strategies given the increased cost of employment.
- Consider price adjustments to offset the financial impact of higher payroll expenses.
When preparing for 2025, businesses should factor in the revised NI rates and anticipated wage increases to ensure accurate payroll and budget planning.
If you’re concerned about how these changes could affect your business, please get in touch.