Source:  HMRC

Changes to employer National Insurance took effect on 6 April 2025.

The threshold changes mean that some employers are now liable to pay employers’ National Insurance and required to report their employee pay and deductions to HMRC for the first time. 

The changes will usually have been incorporated into existing payroll software for employers who already report PAYE.

Contribution rate increases 

The employer secondary Class 1 National Insurance contributions rate has increased to 15% from 13.8%. The associated Class 1A and 1B National Insurance contributions rates on expenses and benefits given to employees also increased to 15%. 

 

Secondary threshold for employer National Insurance liability is now lower

The secondary threshold is the point at which employers start to pay employer National Insurance contributions on an employee’s salary. The secondary threshold decreased from £9,100 to £5,000 per year. 

Employers now need to pay employer National Insurance contributions where they employ staff earning £5,000 a year or more, and report these payments to HMRC, from 6 April 2025.

Those new to paying employer National Insurance contributions need to register for PAYE with HMRC and use payroll software. 

 

Employment Allowance changes 

The Employment Allowance (EA) reduces eligible employers’ National Insurance contributions liability.

From 6 April 2025, the £100,000 threshold was removed. The EA was previously restricted to employers with National Insurance contributions bills of less than £100,000 in the previous tax year.

The maximum amount of EA also increased from £5,000 to £10,500, which means more eligible businesses will be able to claim, and at an increased amount. There have been no other changes to the EA eligibility criteria.  

Most businesses or charities can apply for EA. However, they cannot do so if they are a public body or a business whose activities wholly or mainly involve the performance of functions which are of a public nature. Whether these functions are publicly funded can indicate functions of a public nature, but funding alone is not the deciding factor.

Businesses will need to continue to consider if they are a connected company. If, at the start of the tax year, 2 or more companies are connected with each other, only one of those companies can qualify for the EA for that tax year.

If the company has just one director and that director is the only employee liable for secondary Class 1 National Insurance contributions, they are also ineligible. 

Abolition of the £100,000 EA threshold also means that from 6 April 2025, employers will no longer need to consider state aid where they had previously done so because of the threshold restriction.

Small Employers’ Relief compensation rate increased to 8.5%

The rate increased to 8.5% on 6 April 2025, as a result of aligning it with changes to employer National Insurance contributions.

Employers who qualify for Small Employers’ Relief — if they have paid £45,000 or less in Class 1 National Insurance contributions, can reclaim 100% of all statutory payments they pay except Statutory Sick Pay which cannot be reclaimed, plus an additional 3% compensation. This means small employers can now reclaim 108.5% from HMRC.

The compensation rate applies to:

·         statutory maternity

·         statutory paternity

·         statutory adoption

·         statutory parental bereavement

·         statutory neonatal care

·         shared parental pay

All other employers, paying Class 1 National Insurance contributions, can reclaim 92% of what they pay in these statutory payments with the exception of statutory neonatal care pay.

Further information is available on:

·         PAYE and payroll for employers

·         rates and thresholds for employers 2025 to 2026

·         Employment Allowance — what you’ll get and check if you’re eligible

·         Employment Allowance — further guidance for employers including details on connected companies, connected charities, single-director companies, employers of care and support workers

·         get financial help with statutory pay — what you can reclaim

Employer National Insurance changes were announced at Autumn Budget 2024. 

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