On 30th October 2024, Chancellor of the Exchequer Rachel Reeves delivered a budget designed to address the much talked about 'black hole' in the UK's public finances. After weeks of speculation and with promises that workers' payslips would not be impacted, the Chancellor revealed a number of tax hikes designed to plug the estimated £40bn funding gap.
In its Autumn Budget report, the Treasury stated "Repairing the public finances and increasing funding for public services requires difficult decisions on tax to raise additional revenue. The government has committed to not increase taxes on working people, which is why it is not increasing the basic, higher or additional rates of income tax, National Insurance contributions or VAT"
While that promise was ultimately kept, the decision to increase the rate of employer National Insurance contributions (NICs), while, at the same time, reducing the threshold at which employers become liable to pay National Insurance has left many small business owners wondering how the tax hikes will impact their business.
In this article, we explain how the increase in employers' national insurance contributions works and when the changes are applied. Additionally, we have provided tables so that you can see how the changes could impact your business.
Changes to employers' National Insurance (NICs) 2025/26
As part of a number of measures to raise the £40bn needed to plug the funding gap, Chancellor Rachel Reeves implemented three key changes in employer national insurance contributions from April 2025. We summarise these changes below.
Increase in the rate of employer NICs
From 6th April 2025, the rate of employer NICs will rise by 1.2 percentage points from 13.8% to 15%.
Reduction in the Secondary Threshold
The Secondary Threshold is the level at which employers start paying national insurance on each employee’s salary. This is being reduced from £9,100 to £5,000 on the 6th April 2025.
Employment Allowance increasing
Employment Allowance is a benefit that allows eligible employers to reduce their national insurance liability. The rules currently allow businesses with a national insurance liability totalling less than £100,000 to claim up to £5,000 for the 2024/25 tax year.
From the 6th April 2024, Employment Allowance will increase from £5,000 to £10,500 and the £100,000 threshold will be removed, meaning it is now available for all employers.
How will the changes to employer NICs impact my business?
We have provided a summary table below, which shows how the employer NIC increases will vary by salary levels when the increase takes effect on 6th April 2025.
How much will employer NICs increase in 2025/26?
| Employee annual salary | Employer NICs (per month) 2024/25 | Employer NICs (per month) 2025/26 | Total Monthly Employer NI Increase 2025/26 | Total Annual Employer NI increase 2025/26 |
| £20,000 | £125 | £188 | £63 | £746 |
| £25,000 | £183 | £250 | £67 | £806 |
| £33,700 (Average UK wage) | £283 | £359 | £76 | £910 |
| £50,000 | £470 | £563 | £92 | £1,106 |
| £75,000 | £758 | £875 | £117 | £1,406 |
| £100,000 | £1,045 | £1,188 | £142 | £1,706 |
How much employment allowance can my business claim in 2025/26?
Employment allowance will increase from £5,000 to £10,500 on 6th April 2025, giving eligible businesses access to a benefit worth an additional £5,500. In addition, the £100,000 eligibility threshold is being removed, meaning it will be available to all businesses irrespective of their employer NIC liability. Read on to find out how the changes to employer NICs are likely to impact your business in 2025/26.
Employer NICs increase 2025/26 - Family business example
In the first example, we look at a small family business that employs five people including one team manager on £50,000, a team leader on £33,700 and three junior staff on £20,000.
| Staff and Salary | Total Annual Employer NICs increase 2025/26 |
| 3 Junior staff members on £20,000 | £2,238 |
| 1 Team leader on £33,700 | £910 |
| 1 Team Manager on £50,000 | £1,106 |
| Total | £4,254 |
As you can see from the example above, employer national insurance contributions have increased by £4,254 per year, however, we also need to factor in the changes to employment allowance.
| Current 2024/25 Annual Employer NICs | 2025/26 Annual Employer NICs | |
| Employer National Insurance Contributions | £13,552 | £17,806 |
| Employment Allowance | -£5,000 | -£10,500 |
| Total NICs Payable | £8,552 | £7,306 |
So, while many businesses will be concerned about higher tax bills in 2025/26, the changes in the Autumn Budget could actually mean that you pay less tax. In the example above, the family business would end up paying £1,246 less per year in employer NICs.
Employer NICs increase 2025/26 - Small business example
In this example, we look at a business that employs ten staff including one senior leader on £75,000, two team leaders on £50,000, five staff on £33,700 and two junior staff on £20,000.
| Staff and Salary | Total Annual Employer NICs increase 2025/26 |
| 2 Junior staff members on £20,000 | £1,492 |
| 5 Staff on £33,700 | £4,550 |
| 2 Team leaders on £50,000 | £2,212 |
| 1 Senior leader on £75,000 | £1,406 |
| Total | £9,660 |
As you can see from the example above, employer national insurance contributions have increased by £9,660 per year, but again, we also need to factor in the changes to employment allowance.
| Current 2024/25 Annual Employer NICs | 2025/26 Annual Employer NICs | |
| Employer National Insurance Contributions | £40,365 | £50,025 |
| Employment Allowance | -£5,000 | -£10,500 |
| Total NICs Payable | £35,365 | £39,525 |
In the example above, the small business would end up paying £4,160 more per year in employer NICs.
Employer NICs increase 2025/26 - Medium-sized business example
In this example, we look at a business that employs fifty staff including a CEO on £100,000, three board members on £75,000, two team leaders on £50,000, fifteen staff on £33,700, twenty-five staff on £25,000 and four junior staff on £20,000.
| Staff and Salary | Total Annual Employer NICs increase 2025/26 |
| 4 Junior staff members on £20,000 | £2,983 |
| 25 Staff on £25,000 | £20,145 |
| 15 Staff on £33,700 | £13,653 |
| 2 Team leaders on £50,000 | £2,212 |
| 3 board members on £75,000 | £4,217 |
| 1 CEO on £100,000 | 1,706 |
| Total | £44,916 |
As you can see from the example above, employer national insurance contributions have increased by £44,916 per year as a result of the changes made in the Autumn Budget. We now need to factor in the employment allowance because the removal of the £100,000 eligibility threshold means that this business now qualifies for the full £10,500 benefit from 2025/26.
| Current 2024/25 Annual Employer NICs | 2025/26 Annual Employer NICs | |
| Employer National Insurance Contributions | £162,909 | £207,825 |
| Employment Allowance | £0 | -£10,500 |
| Total NICs Payable | £162,909 | £197,325 |
So, in the example above, this medium-sized business would end up paying £34,416 more per year in employer NICs.
Are there any other increased costs for businesses in 2025/26?
It was confirmed in the Autumn Budget that the National living wage for those aged 21 and over will be increased by 6.7% from £11.44 to £12.21 per hour from April 2025. Additionally, the national minimum wage for 18-20 year-olds will be increased by 16.3% and the rate for under 18's and apprentices has increased by 18%.
The changes to the National Living Wage for April 2025 are summarised below.
- Rate for those over 21 - 6.7% rise - increased from £11.44 an hour to £12.21 (6.7% rise)
- Rate for 18-20 year-olds - increased from £8.60 an hour to £10.00 (16.3% rise)
- Rate for under 18's and apprentices - increased from £6.40 an hour to £7.55 (18.0% rise)
To put this into context, a business employing a full-time worker earning the National Living Wage would see wages increase by approximately £1,500 per year.
