From 6 April 2025, UK employers will face significant changes to National Insurance Contributions (NICs), as part of the government’s effort to bolster public finances.
WHAT’S CHANGING?
The employer NIC rate will rise from 13.8% to 15%.
The earnings threshold for employer NICs will drop from £9,100 to £5,000 per year.
These adjustments are expected to generate around £25 billion annually by 2029–30, earmarked to support public services.
BUSINESS IMPACT
While the changes aim to strengthen the economy, many employers have raised concerns about the implications. Major retailers and hospitality groups have flagged potential consequences such as increased costs, reduced working hours, and possible job losses. With the hospitality sector alone predicting an additional £1 billion in annual costs, the pressure on employers is mounting.
SUPPORT FOR SMALL BUSINESSES
To ease the burden, the Employment Allowance will increase from £5,000 to £10,500, offering some financial relief to smaller businesses.
LONG-TERM CONSIDERARTIONS
The Office for Budget Responsibility estimates that around 75% of the cost of the NICs hike may eventually be passed on to employees, potentially dampening wage growth and affecting pension contributions.
WHAT SHOULD EMPLOYERS DO?
Now is the time for businesses to review their payroll strategies, consider workforce planning, and explore ways to remain competitive while managing these increased obligations.
WHAT NEXT?
While the NICs increase is intended to contribute positively to national priorities, it’s vital that employers prepare thoughtfully to balance compliance with business resilience.
For further help and guidance, get in touch with a member of the Hello Chief team at hello@hellochief.co.uk.
