Watch out- increase in employer’s NI
From the 6th April 2025, there will be an increase in employers’ NI. But how can we help you navigate the changes as tax efficiently as possible?
Class 1 NI is payable by both employees and employers on earnings. For employees, the Class 1 NI contributions earn them a qualifying year of state pension and contributory benefits. In the latest Budget, we can confirm that there will be no changes to the primary Class 1 rates, threshold or upper earnings limit until the 6th April 2028.
For 2025/26, employees will pay primary contributions at the rate of 8% on earnings between £242 and £967 per week and at the rate of 2% on any earnings above this.
The lower earnings limit will increase to £125 per week. If you fall under this threshold you will not be liable to pay the primary Class 1 NI contributions but treated as though you have paid at a zero rate, therefore still qualifying for a year of state pension and benefits!
However, employers were not so lucky! From the 6th April 2025, the secondary Class 1 rate will increase by 1.2% to 15% and the secondary threshold will fall from £9,100 to £5,000 per year.
The Class 1A and Class 1B rates are also rising to 15% for 2025/265, increasing the cost to an employer of providing employees with taxable benefits or meeting a tax liability on their behalf by means of a PAYE settlement agreement.
To try and reduce the impact of the increases, you could look into hiring more employees that are under the age of 21 or veterans that have just left the armed forces so they can take advantage of the upper secondary thresholds (and only pay secondary contributions on earnings over £50,270). You could also look into hiring more part-time employees and less full-time employees as this increases the number of secondary thresholds available where no contributions are payable.
As you can see, this may get very complex for individual situations. Give us a call today on 01622 738165 and we can formulate a plan for you to make sure you are getting the most out of your business.