The Chancellor has announced that the main rate of secondary Class 1 national insurance contributions (NIC) for employers will increase by 1.2 percentage points from 13.8% to 15% from April 2025.
The Class 1A and Class 1B employer rates (relating to benefits) will also increase in line with this.
As well as the rate increase, the earnings threshold above which employer’s national insurance is payable on an individual’s earnings will be slashed from £9,100 to £5,000 per annum. This means that an extra £4,100 per employee will be subject to employer’s NIC at 15%.
To soften the blow the employment allowance, which allows companies to reduce their national insurance liability, will be increased from £5,000 to £10,500. Currently the employment allowance is only available to businesses whose total secondary Class 1 NIC liability is less than £100,000. This limit will be removed from April 2025.
Some smaller businesses may find that their employer’s NIC burden is reduced overall following these changes.
There are certain circumstances where the employment allowance is restricted, for example where a company consists of only one single director and no other employees.
Where two or more companies are connected, the employment allowance is only available for one of the companies in the group. Companies are connected if:
- one company controls another; or
- both companies are controlled by the same person or group of people.
Contact us if you are unsure whether the employment allowance is available to your business.
