As had been widely predicted, the Chancellor announced increases to the rate of National Insurance contributions (NICs) that are paid by employers. The main rate of secondary Class 1 NICs will increase by 1.2% to 15% (from 13.8%) effective from 6 April 2025. The Class 1A and Class 1B employer rates will also increase in line with this change.
The Class 1 NICs secondary threshold, the level at which employers start to pay NICs, will also be reduced to £5,000 (from £9,100) per year. This change will take effect from 6 April 2025 and last until 5 April 2028. Thereafter, the secondary Class 1 NICs threshold will be increased annually in line with the Consumer Price Index (CPI).
To help small businesses with these changes it was also announced by the Chancellor, Rachel Reeves, that the Employment Allowance will increase from £5,000 to £10,500. Currently, the allowance is only available to employers that have employer NIC liabilities of under £100,000. The Chancellor confirmed that this threshold will be removed and that all eligible small businesses will benefit from the increased rate. Government figures have confirmed that this results in 865,000 employers paying no NICs next year. These changes will come into effect from April 2025.