Employers’ NICs threshold is being reduced by 45%; there is a crisis coming and there is real fear across the business community

 National Insurance is a tax on earnings that is paid by both employees (from their wages) and by employers (on top of the wages they pay out), as well as by the self-employed (from their trading profits).

The government are making four changes to employer NICs, all of which take effect at the start of the next tax year (6 April 2025): reducing the threshold for the employer’s contribution from £9,100 to £5,000, increasing the tax rate on employers’ contribution from 13.8% to 15%, increase the tax rate of employer contributions on taxable benefits-in-kind to 15% and increasing the employers Employment Allowance from £5,000 to £10,500.

Previously, the Employment Allowance was for small businesses whose NICs the previous year were less than £100,000. From April 2025 the £100,000 restriction will be removed, making the allowance available to all eligible businesses and charities regardless of their previous year’s National Insurance liabilities. The Employment Allowance is a set maximum amount that can be claimed in each tax year. From April 2025 the maximum that can be claimed by a business for the tax year is £10,500.

What the reduced threshold means for employers is that for someone earning £20,000 in 2025-2026, their employer will pay. £2,250 in NICs. That is an increase of £746 (or nearly 50%) over 2024-2025. For an employee earning $40,000 and £60,000 there will be an increase in employer NICs of 23% (£986) and 17.5% (£1,226) respectively. These increased NICs directly impact a business’ bottom line; they reduce a business’ profit or increase its loss. If, for example, a business cannot increase its customer prices to compensate, it could mean the end of the line....<<<Read More>>>...