From 6 April 2025, changes to the Employment Allowance (EA) and employer National Insurance contributions (NICs) will impact many UK businesses. These updates are designed to support smaller employers, but they come alongside an increase in the cost of employing staff. Here is what you need to know.
The EA will rise from £5,000 to £10,500 per year. This means eligible employers can reduce their secondary Class 1 NIC bill by up to £10,500 across the tax year.
The existing cap that excluded employers who paid more than £100,000 in secondary Class 1 NICs in the previous year will be removed. From April 2025, businesses can claim the allowance regardless of their NIC liability in the prior year, provided they meet other eligibility criteria.
The main rate of employer NICs will increase from 13.8% to 15%.
The secondary threshold—where employers begin to pay Class 1 NICs—will fall from £9,100 to £5,000 per year. This means NICs will apply to more of each employee's salary.
Most businesses and charities paying employer Class 1 NICs can benefit from the allowance, assuming they meet HMRC's usual criteria.
Employers claim the allowance via their payroll software or HMRC's Basic PAYE Tools. The allowance is offset automatically against secondary Class 1 NICs until the £10,500 cap is reached or the tax year ends. You can claim up to your actual NIC bill if your total liability is under this amount.
The changes aim to soften the impact of higher NIC rates, particularly for smaller businesses.
If you are unsure whether your business qualifies or want to understand how the changes will affect your payroll, you can contact us on 01623 490 120 or email This email address is being protected from spambots. You need JavaScript enabled to view it.
Haidee is our Personal Tax Director and is a fully qualified tax adviser, having achieved the ATT qualification in 2006. Tax efficiency being her main concern. Specialising in taxation, Haidee provides clients with advice on personal tax, PAYE services, VAT and social security. She also provides guidance to new start-up businesses.
Call us today on01623 490120
or email info@watsonk.co.uk
When you first start a business, your focus is usually on attracting customers, generating sales and building a successful company. Few business owners spend much time thinking about how or when they will eventually leave the business.
More blog posts