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.
Employment Allowance increase
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.
Wider eligibility
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.
NIC rate changes
The main rate of employer NICs will increase from 13.8% to 15%.
Lower threshold for NICs
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.
Who can claim?
Most businesses and charities paying employer Class 1 NICs can benefit from the allowance, assuming they meet HMRC's usual criteria.
How the allowance is applied
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.
What does this mean in practice?
The changes aim to soften the impact of higher NIC rates, particularly for smaller businesses.
Summary of Key Changes 2025/26
Next steps
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