Paying your employees will cost you more after 6 April

From 6 April 2025, changes to employer National Insurance Contributions (NICs) will take effect, increasing payroll costs for many businesses.

If you employ staff, it is advisable to prepare now for how these changes will impact you financially.

Here are the key numbers to keep in mind:

• Lower NICs threshold – Employers will start paying NICs at £5,000, down from £9,100.
• Higher NICs rate – The secondary Class 1 NICs rate will rise from 13.8 per cent to 15 per cent, increasing employer costs.
• Larger Employment Allowance – For eligible businesses, this will increase from £5,000 to £10,500, more than doubling the relief on their NICs liabilities.
• No more £100,000 cap – More businesses will now be able to claim the Employment Allowance, as the cap is being removed.

With these changes approaching, you should assess your payroll costs and plan to manage the financial impact on your business.

How will this affect your business?

Despite the Employment Allowance increase and the removal of the £100,000 cap, many businesses will feel the pinch in April. The changes are set to cause:

• Increased employment costs – The combination of a lower threshold and higher NICs rate means many employers will pay more.
• Greater strain on cash flow – Higher NICs liabilities may require businesses to adjust payroll budgets to manage rising costs.
• Limited relief for some businesses – While the increased Employment Allowance will help, it may not fully offset the additional NICs for employers with larger payrolls.

Understanding these impacts now can help you adjust your financial planning and ensure your business is prepared for the changes ahead.

Do not let these changes catch you off-guard. Contact us today for advice on financial forecasting, payroll planning, and exploring tax efficiencies.