Employer NI Changes 2025: 15% Rate, £5,000 Threshold & Cost Impact
From April 2025: employer NI rose to 15%, the secondary threshold was cut to £5,000/year. Calculate your increased costs and check your Employment Allowance entitlement.
Summary of Changes from April 2025
April 2025 brought the most significant overhaul to employer National Insurance contributions in over a decade. Announced in the Autumn Budget 2024 by Chancellor Rachel Reeves, these changes were designed to raise an estimated £25 billion per year for public services. For employers, however, they represent a substantial increase in the cost of employing staff.
Three key changes took effect simultaneously on 6 April 2025, creating a compounding impact on payroll costs:
- Rate increase: The employer NI rate rose from 13.8% to 15%
- Threshold reduction: The Secondary Threshold fell from £9,100 to £5,000 per year
- Employment Allowance increase: The allowance more than doubled from £5,000 to £10,500, and the £100,000 eligibility cap was removed entirely
Use our Employer NI Calculator to see exactly how these changes affect your specific payroll costs.
Rate Increase: 13.8% to 15%
The headline change is the increase to the employer NI rate from 13.8% to 15%. This 1.2 percentage point rise may sound modest, but it represents an 8.7% increase in the rate itself — the largest single jump in employer NI rates in decades.
To put this in perspective, employer NI had remained at 13.8% since April 2011, apart from a brief increase to 15.05% during the Health and Social Care Levy period in 2022–2023, which was subsequently reversed. The April 2025 increase to 15% is therefore a near-permanent step change in payroll costs.
For every £10,000 of salary above the Secondary Threshold, employers now pay £1,500 in NI rather than the previous £1,380 — an extra £120 per £10,000. On a workforce of 50 employees earning an average of £35,000, this rate change alone adds tens of thousands of pounds in annual costs.
Threshold Reduction: Secondary Threshold Drops to £5,000
Perhaps the more impactful change for many businesses is the reduction in the Secondary Threshold — the point at which employer NI becomes payable. Previously set at £9,100 per year, it dropped sharply to £5,000.
This £4,100 reduction means employers now pay NI on an additional £4,100 of each employee’s earnings. At the new 15% rate, that equates to an extra £615 per employee per year, regardless of salary level. This flat-cost increase hits lower-paid roles particularly hard as a proportion of total salary cost.
For a part-time employee earning £12,000 per year, the employer NI bill effectively increased from £400 to £1,050 — a rise of over 160%. The threshold reduction disproportionately affects businesses that employ large numbers of part-time or lower-paid workers, such as those in retail, hospitality, and social care.
Employment Allowance Increase and Removal of the £100k Cap
To soften the blow for smaller businesses, the government more than doubled the Employment Allowance from £5,000 to £10,500. Additionally, the previous eligibility restriction — which excluded employers with a previous year’s NI liability exceeding £100,000 — was completely removed.
The Employment Allowance is a per-business annual credit against employer NI. This means:
- Businesses with total employer NI liability under £10,500 pay no employer NI at all
- All eligible employers now benefit, regardless of size (the £100k cap removal opens it to medium and larger businesses)
- The allowance cannot reduce your NI bill below zero — unused portions are not refundable
- Connected companies and charities may have different eligibility rules
For a small employer with five staff on £25,000, the total NI bill after the Employment Allowance may actually be lower than under the old rules. However, the benefit diminishes rapidly as headcount and salary levels increase.
Before vs After: Cost Comparison at Different Salary Levels
The table below illustrates the annual employer NI cost per employee at various salary levels, comparing the old and new rules. These figures are per employee and do not include the Employment Allowance, which is applied at business level.
| Annual Salary | Old NI (13.8%, £9,100 threshold) | New NI (15%, £5,000 threshold) | Annual Increase | % Increase |
|---|---|---|---|---|
| £12,000 | £400 | £1,050 | £650 | 162.5% |
| £20,000 | £1,504 | £2,250 | £746 | 49.6% |
| £25,000 | £2,194 | £3,000 | £806 | 36.7% |
| £30,000 | £2,884 | £3,750 | £866 | 30.0% |
| £40,000 | £4,264 | £5,250 | £986 | 23.1% |
| £50,000 | £5,644 | £6,750 | £1,106 | 19.6% |
| £75,000 | £9,094 | £10,500 | £1,406 | 15.5% |
| £100,000 | £12,544 | £14,250 | £1,706 | 13.6% |
As the table demonstrates, the percentage increase is most severe for lower-paid employees. A worker on £12,000 sees their employer’s NI cost rise by over 160%, while for someone on £100,000 the increase is closer to 14%. This regressive pattern makes the changes especially challenging for labour-intensive sectors with lower average wages.
Impact Analysis by Business Size
Small Businesses (1–10 Employees)
Small businesses are the most insulated from these changes thanks to the enhanced Employment Allowance. A sole director or a business with just a few employees may find that the £10,500 allowance fully offsets the increased NI costs. For example, a business with three employees on £30,000 faces a total NI bill of £11,250, but after deducting the £10,500 allowance, the net cost is just £750 — compared to £3,652 under the old regime (after the old £5,000 allowance).
However, small businesses that previously fell below the old £5,000 allowance and now fall below £10,500 should not assume they are unaffected. As the business grows, each additional hire rapidly erodes this buffer.
Medium Businesses (10–100 Employees)
Medium-sized businesses face the largest proportional increase. Previously, many were excluded from the Employment Allowance by the £100,000 NI liability cap. The removal of this cap now grants them access to the £10,500 allowance, which helps — but not nearly enough to offset the combined effect of rate and threshold changes.
A business with 50 employees on an average salary of £35,000 sees its annual NI bill increase by approximately £46,000 (before the Employment Allowance adjustment). After accounting for the newly available £10,500 allowance, the net increase is still over £30,000 per year. For businesses operating on thin margins, this can represent a serious challenge to profitability.
Large Businesses (100+ Employees)
Large employers absorb the full impact of both the rate increase and threshold reduction, with the £10,500 Employment Allowance becoming negligible relative to their total NI bill. A company with 500 employees on an average salary of £40,000 faces an additional annual NI cost of approximately £493,000. For organisations with thousands of employees, the increase runs into the millions.
Many large employers have responded by reviewing headcount plans, delaying recruitment cycles, accelerating automation initiatives, or restructuring compensation packages to include more salary sacrifice benefits.
What This Means for Hiring Decisions
The April 2025 changes have materially altered the cost-benefit calculation for hiring new staff. Every new employee now carries a higher baseline NI cost, which directly affects:
- Break-even analysis: New hires need to generate more revenue to cover their increased total employment cost
- Part-time roles: The fixed £615 additional cost per employee (from the threshold reduction) makes multiple part-time hires comparatively more expensive than fewer full-time roles
- Contractor vs employee decisions: The widened cost gap between employees and self-employed contractors may push some businesses toward outsourcing
- Salary negotiations: Employers may offer lower base salaries to accommodate the increased NI burden, or shift toward benefits-heavy packages
Strategies for Mitigating the Impact
Maximise the Employment Allowance
Ensure your business is claiming the full £10,500 Employment Allowance. With the removal of the £100,000 cap, many businesses that were previously excluded can now claim. Check eligibility carefully — sole-director companies without other employees remain ineligible. You must indicate your claim through your payroll software or RTI submission.
Salary Exchange (Salary Sacrifice) Schemes
Salary exchange arrangements for pension contributions, cycle-to-work schemes, electric vehicle leasing, and childcare vouchers reduce the gross salary on which employer NI is calculated. At the new 15% rate, every £1,000 sacrificed saves the employer £150 in NI. Encouraging employees to participate in salary exchange pension schemes can generate significant savings for both parties.
Hiring Under-21s and Apprentices
Employers pay zero NI on earnings up to £50,270 per year for employees under 21 and for apprentices under 25. This relief was retained after April 2025 and represents a meaningful advantage for businesses that can recruit from these age groups. The saving compared to a standard employee on £25,000 is now £3,000 per year.
Review Workforce Structure
Consider whether some roles could be filled by genuine self-employed contractors (being mindful of IR35 rules), or whether consolidating part-time roles into fewer full-time positions might reduce the per-head NI burden from the lowered threshold.
Timeline of Employer NI Rate Changes
| Tax Year | Employer NI Rate | Secondary Threshold | Notes |
|---|---|---|---|
| 2011–2022 | 13.8% | Varied (£7,488–£9,100) | Long period of rate stability |
| 2022–2023 | 15.05% | £9,100 | Health and Social Care Levy applied |
| 2023–2024 | 13.8% | £9,100 | Levy reversed by Chancellor Hunt |
| 2024–2025 | 13.8% | £9,100 | Final year at old rate |
| 2025–2026 | 15.0% | £5,000 | Current year — major increase |
How to Prepare Your Payroll
If you have not already updated your payroll systems, take the following steps immediately:
- Update payroll software: Ensure your software provider has applied the April 2025 rate and threshold changes. Most cloud-based providers updated automatically, but on-premise solutions may require manual patches.
- Recalculate budgets: Use our Employer NI Calculator to model the exact impact on your payroll. Update your annual staffing budget to reflect the increased costs.
- Claim the Employment Allowance: If eligible, ensure the Employment Allowance indicator is set correctly in your first Full Payment Submission (FPS) of the tax year. You do not need to apply separately — it is claimed through your RTI submissions.
- Review employment contracts: If you are introducing or expanding salary exchange schemes, ensure contracts are updated before implementation. Retrospective salary sacrifice is not permitted by HMRC.
- Communicate with employees: While employer NI does not directly reduce employee take-home pay, the indirect effects on hiring, pay rises, and benefits should be communicated transparently.
- Seek professional advice: For complex workforce structures, consider consulting a payroll specialist or accountant to identify all available reliefs and optimise your NI position.
Looking Ahead
The government has stated that the 15% rate is intended to be a permanent change rather than a temporary measure. While the Employment Allowance increase provides welcome relief for smaller businesses, the overall direction is clear: employing people in the UK has become more expensive.
Businesses should factor these increased costs into long-term financial planning, workforce strategy, and pricing models. Those that proactively adapt — through salary exchange schemes, strategic use of reliefs, and careful workforce planning — will be best positioned to manage the impact.
For a detailed breakdown of your specific employer NI costs under the new rules, try our Employer NI Calculator.