Starting April 6, 2025, UK businesses will see an increase in National Insurance (NI) costs due to new tax changes. The employer NI rate will rise from 13.8% to 15%, while the secondary threshold—the income level above which NI contributions are required—will decrease from £9,100 to £5,000 annually (£417 monthly). These changes mean employers will face higher payroll expenses for staff earning over £5,000 per year.
Key Changes to National Insurance in 2025/26
With these adjustments, businesses must prepare for increased costs and ensure payroll compliance. Here are the main updates:
- Employer NI Rate: Rising to 15% for earnings above £5,000 per year.
- Employee NI Rate: Typically remains at 12%, depending on category.
- Secondary Threshold: Lowered to £5,000 annually (£417 monthly).
- Example Impact: For a Category A employee earning £30,000 annually, the employer’s NI contribution will increase to approximately £3,749.
Understanding National Insurance Categories
Employers must correctly assign NI categories to their employees to ensure accurate deductions. Here’s a breakdown of the main NI classifications:
| Category | Employee Group |
|---|---|
| A | Default category for most employees |
| B | Married/widowed women eligible for reduced NI contributions |
| C | Employees over State Pension age |
| H | Apprentices under 25 |
| J | Employees with multiple jobs paying NI elsewhere |
| M | Employees under 21 |
| V | Army veterans in their first civilian job |
| Z | Employees under 21 with another job contributing to NI |
Most employees fall under Category A unless they meet specific criteria.
How Businesses Can Prepare
With payroll costs set to rise, businesses should plan ahead to manage expenses effectively. Employers can use tools like the National Insurance Calculator to estimate contributions and ensure compliance with the new tax framework.
Staying informed and preparing early will help businesses navigate these changes while maintaining financial stability.