Will you or your business pay more National Insurance from April 2025? 

Changes to National Insurance (NIC) will take effect from April 2025, impacting employees, employers, and the self-employed. 

Businesses with employees will see the most significant changes. While very small businesses may benefit from National Insurance savings, those with more than a handful of employees will likely pay more in employer NICs. 

Key changes for employers 

From 6 April 2025, the Government will introduce four key changes affecting employer National Insurance contributions: 

Tax increases: 

The secondary Class 1 NIC threshold (the level at which employers start paying NICs) will decrease from £9,100 to £5,000 per annum. This means employers will pay NICs on staff earning more than £5,000 a year. 

The main employer NIC rate will increase from 13.8% to 15%. This also applies to Class 1A and Class 1B NICs for taxable benefits-in-kind. 

Employment Allowance Enhancements: 

All employers will be eligible to claim the Employment Allowance, removing the previous restriction for businesses with an NIC liability over £100,000. 

The Employment Allowance will increase from £5,000 to £10,500, reducing employer NIC liabilities for eligible businesses. 

However, single-director companies (where the director is the sole employee earning above £5,000) remain ineligible for the Employment Allowance. 

Page 2 of 4 Updated: January 2025

Changes to National Insurance (NIC) from April 2025 

How this affects your business 

For most businesses with employees, these changes will increase costs. Ignoring the benefit of the increased Employment Allowance, a company employing someone on the UK average salary of £36,000 will pay an additional £938 per year in employer NICs. 

However, smaller businesses may benefit from the increased allowance. For example, businesses with fewer than six employees earning £36,000 each should see an overall NIC reduction. Larger employers or those paying higher salaries will see costs rise as the allowance becomes less impactful. 

That said, with the increased Employment Allowance, it is expected that around 865,000 employers will be exempt from paying NICs, and more than half of employers with NIC liabilities will not be worse off in the next tax year. 

Changes for Employees 

Employees will not see direct changes in National Insurance from April 2025. The main employee NIC rates remain unchanged at: 

8% (for earnings between £12,570 and £50,270) 

2% (for earnings above £50,270) 

Changes for the Self-Employed 

Self-employed individuals may benefit from recent changes: 

Class 2 NICs (previously £3.45 per week) have been abolished for most self-employed individuals earning over £12,570 from 6 April 2024 - a saving of £179.40 per year. 

The Class 4 NIC rate (on profits between £12,570 and £50,270) will drop from 9% to 6%. The rate for profits above £50,270 remains at 2%. 

Page 3 of 4

Updated: January 2025 

Changes to National Insurance (NIC) from April 2025 

Impact on UK Startups 

The Autumn Budget 2024 National Insurance changes will have mixed effects on startups, with both increased costs and potential savings. 

Startups should consider three key changes: 

1. Higher Employment Costs – The increase in employer NICs from 13.8% to 15% raises staffing costs, especially for growing teams. 

2. Lower Earnings Threshold – The NIC threshold for employers will drop from £9,100 to £5,000, meaning NICs kick in sooner. 

3. Employment Allowance Benefits – The increased Employment Allowance (£10,500) and removal of the £100,000 cap could help many startups offset higher costs. 

How can businesses reduce costs? 

While these changes will raise employment costs, strategic planning can help mitigate the impact. 

Options include: 

Salary Sacrifice Schemes – Reducing gross salary in exchange for benefits such as increased pension contributions can lower NIC liabilities. 

Maximising R&D Tax Relief – Startups engaged in innovation can benefit from R&D tax relief, which includes staff costs for qualifying projects. The increased NIC burden could, in turn, increase R&D tax relief claims, helping to offset costs. 

How can Onside help? 

Our expert team of accountants and tax advisors can help you navigate these changes, ensuring your business remains compliant while maximising tax reliefs and allowances. 

We can: 

Assess your NIC liabilities and explore potential savings. 

Advise on remuneration structures to reduce employer NIC cost. 

Identify and support other tax reliefs such as R&D tax credits which might offset the increased costs.