Labour Budget - Employer’s National Insurance Changes - Ad Valorem
2 minutes
The largest change to taxes in the Autumn budget was their changes to Employer’s National Insurance (NI)which take effect from 1st April 2025. Increasing the employment allowance while increasing both the rate of NI and lowering the threshold at which employers start paying NI has left many business owners scratching their head as to whether they are better off or worse off from the changes.
The changes:
| Current | From 1st April 2025 | Percentage change | |
| Reducing the Secondary Threshold | £9,100 | £5,000 | – 45% |
| Increasing the rate of National Insurance | 13.8% | 15% | + 9% |
| Increasing the employment allowance | £5,000 | £10,500 | + 110% |
So what does it all mean?
For a number of employers, this will result in a significant increase in the amount of NI payable.
Example 1 – 20 Employees on a salary of £35,000
| Current | From 1st April 2025 | ||
| Salary | £35,000 | Salary | £35,000 |
| Secondary threshold | (£9,100) | Secondary threshold | (£5,000) |
| Rate | 13.8% | Rate | 15% |
| NI per person | £3,574 | NI per person | £4,500 |
| Number of employees | 20 | Number of employees | 20 |
| Total NI | £71,484 | Total NI | £90,000 |
| Less Employment allowance | (£5,000) | Less Employment allowance | (£10,500) |
| NI Due | £66,484 | NI Due | £79,500 |
| Increase in NI due | £13,016 | ||
When these changes are coupled with the increase to the national minimum and living wages, the impact on businesses is compounded.
Example 2 – 6 Employees on the national living wage
| Current | From 1st April 2025 | ||
| Hourly rate | £11.44 | Salary | £12.21 |
| Hours worked (assuming 40 hours a week, 52 weeks a year) | 2,080 | Hours worked (assuming 40 hours a week, 52 weeks a year) | 2,080 |
| Total pay | £23,795 | Total pay | 25,397 |
| Secondary threshold | (£9,100) | Secondary threshold | (£5,000) |
| Rate | 13.8% | Rate | 15% |
| NI per person | £2,027 | NI per person | £3,060 |
| Number of employees | 6 | Number of employees | 6 |
| Total NI | £12,168 | Total NI | £18,357 |
| Less Employment allowance | (£5,000) | Less Employment allowance | (£10,500) |
| NI Due | £7,168 | NI Due | £7,857 |
| Total employment costs (total pay + NI due) | £154,938 | Total employment costs (total pay + NI due) | 160,239 |
How can we help?
It is important that any business with employees assesses the impact of these changes on their business and plans for the coming changes. Our Compliance, Payroll and Tax teams can help you to assess the impact of these changes on your business and help you to plan for the coming changes.
(E) enquiries@advaloremgroup.uk (T) 01908 219100 (W) advaloremgroup.uk
