Businesses count the cost of increases to Employers National Insurance

What will it mean for your payroll?It’s already been a month since the Autumn Budget, but the significant changes the Chancellor, Rachel Reeves, made to the Employers National Insurance (NI) rate and threshold are still sinking in with businesses across the country.From 1 April 2025, the rate for Employers National Insurance (NI) will increase from 13.8% to 15%. At the same time, the level at which employers start paying national insurance on each employee’s salary will be reduced from £9,100 per year to £5,000. The combination of these two changes means a potentially significant increase in payroll costs for businesses.Acting as a concession towards smaller businesses, the employment allowance will be increased from its current £5,000 to £10,500. The Chancellor claimed that this would mean that “865,000 employers won’t pay any National Insurance at all next year and over 1 million will pay the same or less than they did previously.”An employer who employs 4 full time (35 hours per week) employees at the National Living Wage rate will not have to pay NI on their wages. However, increases to the National Living Wage and Minimum Wage rates from 1 April 2025 mean that all businesses are likely to experience increased payroll costs from next April.There was a small bonus for larger businesses in the Budget though. Previously the Employment Allowance could only be claimed by an employer if their Employers NI liability was less than £100,000 in the previous tax year. This restriction will be removed so that all employers that otherwise qualify will be able to reduce their national insurance liability by £10,500.Many businesses may now be wondering whether they can afford to hire additional staff, and may be looking at increasing prices to cover the extra costs. When you are planning your headcount and budgeting payroll costs for next year you will need to factor in the national insurance and minimum wage increases. If you need any help with calculating and budgeting for these, please do not hesitate to give us a call.