From 6th April 2025, businesses across the UK will see an increase in Employer National Insurance Contributions (NICs) as part of the government’s latest tax reforms. These changes will have a direct impact on payroll costs, and employers need to be prepared to manage the financial and operational implications.
At Qualitas Payroll, we help businesses stay compliant while ensuring payroll processes remain as cost-efficient as possible. Here’s everything you need to know about the NIC increases, how they will affect your business, and how an outsourced payroll solution can help manage these changes smoothly.
What’s Changing?
From 6th April 2025, Employer National Insurance Contributions (NICs) will increase by 1.2%, rising from 13.8% to 15%. This means that businesses will have to pay more in NICs for each employee earning above the threshold.
Additionally, the Secondary Threshold for Employer NICs, the point at which businesses begin paying NICs for employees, will be lowered from £9,100 to £5,000. This means that employers will start paying NICs at a much lower earnings level than before, further increasing costs for businesses.
However, the Employment Allowance, which provides relief on Employer NICs for eligible small businesses, will increase from £5,000 to £10,500. The government claims that this measure will “impact around 1.2 million employers. Around 250,000 employers will see their Secondary Class 1 NICs liability decrease and around 940,000 will see it increase. Around 820,000 employers will see no change. Overall, more than half of businesses with NICs liabilities next year will either gain or will see no change in their secondary Class 1 NICs liabilities”.
The Government is also removing the £100,000 eligibility cap for Employment Allowance, meaning that all eligible businesses and charities, regardless of their secondary Class 1 NICs liabilities in the previous tax year, can now claim up to £10,500 in relief on their Employer NICs.
How Will This Impact Employers?
For many businesses, these changes mean a direct increase in payroll costs. Employers will need to review budgets to accommodate:
- Higher NICs contributions per employee due to the rate increase
- More employees becoming eligible for NICs payments as the threshold lowers
- Potential changes to cash flow and payroll costs, particularly for businesses with large workforces
Businesses that don’t qualify for Employment Allowance will feel the financial impact more significantly, as they will see an immediate increase in payroll expenses.
For small businesses, the increase in Employment Allowance will help mitigate some of the extra costs, but it won’t eliminate them entirely, especially for those with growing teams.
How Can Businesses Prepare for the NIC Increase?
With the new financial year fast approaching, employers should take action now to ensure they are ready for these payroll cost increases. Here are some key steps businesses can take:
1. Review Payroll Budgets and Forecasts
Employers should assess their current payroll expenses and project how the NIC increase will affect costs. Budget adjustments may be necessary to accommodate higher payroll tax contributions.
2. Identify Cost-Saving Opportunities
To offset the impact of rising NICs, businesses may need to look at:
- Improving operational efficiency to reduce payroll admin costs
- Reviewing workforce structures to optimise payroll spending
- Exploring outsourced payroll solutions to minimise overheads and compliance risks
3. Ensure Compliance with Payroll Regulations
With the new thresholds and rates coming into effect, payroll teams must ensure all calculations remain accurate to avoid penalties. Outsourcing payroll to an expert provider like Qualitas can help businesses stay compliant without the extra administrative burden.
4. Consider Outsourcing Payroll for Efficiency and Cost Savings
Managing payroll in-house can be time-consuming and costly, particularly when legislative changes increase complexity. Outsourced payroll services provide a cost-effective, hassle-free way to ensure payroll remains accurate, compliant, and efficient.
How Qualitas Payroll Can Help
At Qualitas Payroll, we work with businesses of all sizes to navigate complex payroll changes like the upcoming NIC increases. Our fully managed payroll service ensures:
- Accurate payroll calculations aligned with the latest NIC thresholds and rates
- Real-time reporting to help businesses monitor payroll costs
- Seamless compliance with HMRC regulations, reducing risk and admin workload
- Dedicated account management, providing expert support whenever needed
Whether you’re a small business looking to offset rising costs or a larger organisation needing a scalable payroll solution, we tailor our services to your needs.
Take Action Before April 2025
With Employer NICs increasing from 6th April 2025, businesses must prepare now to manage the additional payroll costs and compliance requirements. Reviewing budgets, forecasting payroll expenses, and considering outsourced payroll solutions can help mitigate the financial impact of these changes.
By partnering with Qualitas Payroll, businesses can stay compliant, reduce payroll admin, and manage costs effectively, ensuring payroll runs smoothly despite the new NIC rates.