The Labour government’s 2024 Autumn Budget introduced significant changes to employer National Insurance contributions (NICs) that will take effect from April 2025.

As chartered accountants supporting businesses of all shapes and sizes across the UK, we’re providing this brief guide to help employers understand and prepare for these important changes.

Key NIC Changes from April 2025

The primary rate of secondary Class 1 NICs will increase to 15% (up from 13.8%), effective from the 6th of April 2025. Class 1A and 1B employer rates will also increase at the same rate (1.2%).

The Class 1 NICs secondary threshold – at which employers begin paying NICs – will be reduced to £5,000 per year, down from the current annual threshold of £9,100. This change will be effective from the 6th of April 2025 and will last until the 5th of April 2028. After this three-year period has elapsed, the secondary Class 1 NICs threshold will increase annually in line with the Consumer Price Index (CPI).

Chancellor Rachel Reeves also announced that the Employment Allowance will increase from £5,000 to £10,500. The existing allowance of £5,000 is available exclusively to employers with NIC liabilities of under £100,000. This threshold will now be removed and all qualifying businesses will benefit from the increased allowance.

Impact on Different Business Types

For smaller businesses, these NIC changes could offer significant relief. The increased Employment Allowance could mean that smaller employers may not need to pay NICs, but with prices continuing to rise, not to mention increases in the national minimum wage, their employee costs could rise. As such, payroll budgets and cash flow forecasts must be assessed very carefully.

Growing businesses may find themselves faced with higher costs per employee acquisition, which could have an impact on their growth strategies and long-term planning. Larger organisations with numerous employees may find their employment costs significantly higher, possibly prompting a strategic review of staffing structures and the establishment of efficient payroll management.

Essential Steps for Employers

Employers should prepare as early as possible to navigate these impending changes. Consider the following:

• Update payroll systems and accounting software to ensure they reflect the rates effective from April 2025.
• Test calculations and contributions before the new tax year to see the knock-on effect of cash flow.
• Review and update business budgets accordingly.
• Consider the timing of forthcoming pay reviews and recruitment milestones.
• Prepare clear, data-backed explanations of any changes this may have on your business. Back this up in relevant documentation.
• Establish clear reporting systems and feedback channels to address any staff concerns.
• Ensure accurate records are kept for NICs calculations, Employment Allowance claims and payroll adjustments for complete peace of mind.

Fulfil Your NIC Obligations With the Help of Professional Accountants 

At Hamlyns, our team of professional accountants can support your business by helping you navigate these changes with complete confidence. Our team of accounting professionals can provide tailored advice to help you maximise your available allowances, ensure compliance with impending UK legislation and calculate the precise financial implications these changes may have on your business.

We have helped our clients overcome similar hurdles in the past, providing them with equitable systems and solutions that help them take their businesses forward even in financially disruptive or concerning times.

Don’t let these changes catch you unprepared; let Hamlyns integrate the right accounting solutions to help you stay the course and fulfil your long-term goals. Contact us today for a no-obligation review.