The UK government’s Autumn Budget 2024 introduced significant changes to employer National Insurance (NI) contributions. These adjustments, taking effect from 6 April 2025, will impact businesses across the UK. Here’s an easy-to-understand breakdown of what’s changing and what it means for employers.
Key Changes to National Insurance
1. Secondary Threshold Reduction
The secondary threshold is the point at which employers start paying National Insurance contributions (NICs) for their employees.
- Current threshold: £9,100 per annum.
- New threshold (from April 2025): £5,000 per annum.
- Duration: The new threshold will apply until 5 April 2028 and will then adjust annually in line with the Consumer Price Index (CPI).
This reduction means employers will start paying NICs on a larger portion of their employees’ salaries, increasing payroll costs.
2. Increase in Employer NI Rates
The secondary Class 1 NIC rate (paid by employers) is increasing:
- Current rate: 13.8%.
- New rate (from April 2025): 15%.
This increase also applies to:
- Class 1A NICs (on employee benefits like company cars or private health insurance).
- Class 1B NICs (on PAYE Settlement Agreements).
3. Employment Allowance Update
While not directly addressed in the announcement, the Employment Allowance provides relief to eligible businesses by reducing their employer NICs bill by up to £5,000 per year. The reduced threshold aligns with this allowance, meaning smaller businesses could offset much of the impact if eligible.
Implications for Employers
Increased Costs for Employers
These changes will lead to higher payroll expenses for businesses, especially those with a large workforce. Employers will pay NICs on a larger portion of wages due to the lower threshold, compounded by the higher rate.
Pressure on Small Businesses
Small businesses that are not eligible for the Employment Allowance may feel the financial impact more acutely.
Strategic Workforce Planning Required
Businesses may need to:
- Reassess budgets to accommodate higher payroll taxes.
- Explore operational efficiencies to manage the increased costs.
- Evaluate eligibility for the Employment Allowance to mitigate some of the financial burden.
For more information, please refer to: Autumn Budget 2024 — Overview of tax legislation and rates (OOTLAR) – GOV.UK
How Quadlux Can Help
Navigating changes to employment taxes can be challenging, especially for businesses managing global workforces.
The reduction of the secondary threshold and the increase in employer NIC rates mark a significant shift in payroll taxation for UK businesses. With proactive planning and expert guidance, businesses can adapt effectively, staying compliant while managing costs.
For personalized assistance, reach out to Quadlux at support@quadlux.net and visit us at Quadlux.net.
