Significant changes to employment taxes were outlined in the recent Autumn 2025 Budget concerning the Employer National Insurance Contributions (NIC), the reduction of the ‘Secondary Threshold’ (ST) as well as Employment Allowance adjustments.
Starting in April 2025, and compounded by the increase to the National Minimum Wage and National Living Wage, these changes will have a significant impact on the cost of employment for many businesses.
The new rates will see employers pay national insurance contributions (NIC) on an employee’s earnings above £5,000 at the rate of 15%.
The Secondary Threshold (ST) has decreased from £9,100 to £5000.
And to help protect qualifying smaller employers from the increase in NIC, the amount of the employment allowance will be increased from £5,000 to £10,500 per year from 6 April 2025. Qualifying large employers will be helped by the removal of the £100k limit, allowing them to now benefit from employment allowance.
We’ve already had lots of conversations with clients who will be impacted, and the reality is clear: businesses will need to identify additional funds to manage this increase. For one of our clients, this change could increase their Employers NI contributions by almost 50%!
How can we help you and your business?
We understand this is an unsettling time to be an employer and larger employers are likely to be hit the hardest. While the changes may seem straightforward, the actual impact on your business depends on various factors, including employee salary levels, eligibility for Employment Allowance, and individual circumstances. We strongly recommend reviewing your remuneration planning well ahead of April 2025 to ensure you’re positioned for the best outcome.
To support employers, our Payroll team has designed an employer NIC calculation tool to achieve an indication of the monthly/annual increase to NIC costs from April 2025 against current costs. You can access this below:
Employer NIC cost increase comparison between 2024-25 and 2025-26_branded
The Cover Note tab explains how to populate the data.
*Note, if Robson Laidler process your payroll, we will soon send you a populated tool to work from.
How to use the Employer NIC calculator tool
Our tool is designed to make it easy for you to assess the financial impact of the upcoming NIC changes and Employment Allowance adjustments.
The purpose of this spreadsheet is to provide you with:
- A comparison of current monthly payroll costs against what they would be in April 2025, and / or;
- A comparison of current monthly payroll costs against April 2025 payroll costs, inclusive of April 2025 salary reviews (such as enforced due to NMW).
- Enter employee details and pay information (you can use your most recent payroll reports to ensure accuracy).
- Calculate the NIC impact for both the current and 2025/26 tax years.
- The tool annualises the data, providing you with an estimate of the annual increase in NIC costs, helping you plan effectively.
You can easily use the tool to self-populate the necessary information or, if you’d prefer, we can assist you with this process for a minimal fee.
Directors NIC tool
Our payroll team has also designed a Directors National Insurance Contributions tool for 2025/26. This illustrates that Directors end up paying the same amount of NI by 5 April regardless of if they are on the ‘Annual’ or ‘Alternative’ NI method of calculation. We tend to receive queries part-way through the tax year for ‘Annual’ NI Directors when their YTD salary starts to exceed their annual NI allowance. You can access this example tool below:
Director NIC workings example 2025-26
Considerations before changing tax efficient salaries:
- Employment Allowance qualification includes there having to be at least 2 Directors earning >ST.
- Paying salaries <ST will not result in receiving ‘NI stamp’ (as the ST is < the LEL).
- Employees (non-Directors) receive their NI allowance in-line with their payment frequency.
- Employees paid >£10,000 pa (£833.33 per month if that is the payment frequency) will trigger Auto Enrolment (and need for an AE pension scheme).
- NMW/NLW for employees receiving a nominal salary for the work they do (£12,570 salary will only allow a maximum of a 19.50 hour working week from 1 April 2025).
- If you move to an annual PAYE basis, this will have to be done in April 2025.
- Annual PAYE schemes only allow you the one chance to get it right per year, being salary and tax code. Any use of an incorrect tax code will have to be corrected via Self-Assessment.
- If set to annual PAYE scheme, any payment paid outside of the selected payment month (March ideally) will result in your PAYE scheme defaulting to monthly (or a non-efficient call to HMRC every year to change the selected payment month).
Employers should ensure that their payroll systems are ready to handle the increase in National Insurance Contributions (NIC) and consider wider tax planning efficiencies.
Other considerations
Could a Business Health Check or even a Waste Audit help your business uncover savings to offset these rising costs?
Our Business Advisory team can help put you at ease by creating a One Page Plan to analyse your financials and adapt to this legislation. We’ll assist you in identifying areas for cost-cutting, potential savings, and ways to boost revenue to cover these new expenses.
If you would like us to help you with any of these calculations or if you need advice on remuneration planning or salary sacrifice options, our payroll and business advisory teams are here to assist.
Please email ba@robson-laidler.co.uk or call us on 0191 2818191 and a member of the team will be happy to help.