The ramifications of the Chancellor’s Budget announcements regarding Employer’s NI changes are now clear. These come into effect from April 2025.
For those that employ staff, some businesses will be winners, but there will be many losers too. NI is currently paid on earnings over £9100, but this will drop to earnings over £5000 from April. So £4100 @ 15% = £615 extra NI will be paid on all employees earning over £9100 pa. In addition, NI was at the rate of 13.8% and this rises to 15%,
Employers allowance – the amount that can be deducted from the total liability – rises though from £5000 to £10500, so these changes may not affect some businesses and indeed they may be slightly better off.
Will your business be better off or worse off?
“It depends” is the answer and the only way to know is to do the “number crunching”. According to HMRC, it is estimated 940,000 employers will pay more NIC in 2025/26.
To further compound the issue, there is also a significant rise in the minimum wage rate too from April, and this will further push up employment costs for some businesses.
Just a very simple example, ignoring the Employers Allowance – an individual working 37.5 hours a week earning £23,000 p.a. (just above minimum wage in the 2024/25 tax year) will cost £1918.20 in Employers National Insurance. In the year 2025 to 2026 this will increase to £2700, an increase of £781.80 or 40.76%! In addition, the wages will also need to go up by £809.50 and a further £121.43 NI liability arises!
