Employers’ National Insurance: What’s Changing and How to Prepare
04/02/2026
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From April 2025, important changes to changes to employer National Insurance (NI) contributions will come into effect. These include a higher NI rate and a lower threshold, meaning more of your payroll will now attract employer NI. For small and medium-sized enterprises (SMEs), this change could mean higher payroll costs and tighter cash flow margins. In this updated guide, we explain what’s changing, why it matters, and how to plan to minimise the financial impact.
Why April 2025 National Insurance changes matter
Employer National Insurance contributions are a key cost of hiring staff. With the 2025/26 tax year changes, more employees will now fall within the NI bracket, increasing the overall cost of employment. This adjustment arrives alongside higher minimum wage rates, putting added pressure on employers already managing inflation-driven expenses.
Key takeaways:
- Employer National Insurance rate increased to 15% (previously 13.8%).
- Employer National Insurance threshold reduced to £5,000 (previously £9,100).
- More employees will now fall within the NI bracket, increasing overall staffing costs.
Even a small percentage rise has a meaningful impact. For example, a business employing 10 staff earning around £25,000 annually could see its NI bill rise by over £5,000 per year. Sectors with larger workforces — such as retail, hospitality, and healthcare — are likely to feel the rise more noticeably.
Why it matters to SMEs: These changes could affect profit margins, pricing decisions, and recruitment plans. Without proactive planning, SMEs might experience unexpected cash flow pressure by mid-year.
2025–26 employer NIC rates and thresholds explained
Here’s a breakdown of the new NI rules for employers in 2025/26:
| Category | 2024/25 | 2025/26 | Change |
|---|---|---|---|
| Employer National Insurance Rate | 13.8% | 15% | +1.2% increase |
| Secondary Threshold (start of employer National Insurance) | £9,100 | £5,000 | Lower threshold |
| Employee National Insurance (Main Rate) | 8% | 8% | No change |
| Employment Allowance | £5,000 | £5,000 | Unchanged |
Example: A small design agency with two full-time employees on £30,000 salaries will now pay around £900 more in NI annually due to the rate rise and threshold drop.
How these changes affect payroll and staffing costs
The new rates will influence how businesses plan payroll and manage compensation. With more gross pay subject to NI, businesses may need to reconsider how they balance salaries, benefits, and non‑cash rewards.”.
Key implications:
- Higher payroll costs: Every additional employee now adds a higher marginal cost to the business.
- Impact on pay negotiations: Employers may need to explain to staff why take-home pay remains unchanged even if gross pay rises modestly.
- Reassessing bonus schemes: Performance-related bonuses could increase overall NI exposure. Fixed allowances or non-cash incentives might be more efficient.
Industry example:
- Retail and hospitality – where staffing costs form a large part of overheads, employers may explore part-time contracts, seasonal scheduling, or automation to manage the increased burden.
- Professional services and tech – companies might adjust benefits (like health insurance or training budgets) rather than basic pay to maintain profitability.
For directors of limited companies, these adjustments could also influence the balance between salary and dividend payments.
Employer Allowance: how to reduce your liability
The Employment Allowance remains one of the most effective tools for reducing your annual NI bill. Eligible employers can claim up to £5,000 off their total contributions per tax year.
Eligibility criteria:
- Your employer National Insurance bill must have been under £100,000 in the previous tax year.
- You must employ staff paid through PAYE.
- You cannot claim if you’re a public body or employ someone for personal/domestic work (like a cleaner or nanny).
How to claim:
- Activate the Employment Allowance in your payroll software (e.g., Xero, QuickBooks, or Sage).
- Submit your claim automatically through your RTI (Real-Time Information) submissions to HMRC.
- The allowance reduces your employer NI bill throughout the year until the full £5,000 is used.
Example: If your total National Insurance cost is £8,500, the Employment Allowance reduces it to £3,500, freeing up funds for investment, training, or wage increases.
Tip: Pair this with the Apprenticeship Levy and other incentive schemes to offset costs if you hire or train new employees.
Speak to an expert about employer National Insurance
How to prepare payroll and cashflow forecasts now
To stay ahead, employers should review payroll and forecasting systems early — ideally by Q1 2025. Building a financial buffer before April ensures a smooth transition.
1. Update payroll software
Check that your payroll system is updated for the new 15% rate and £5,000 threshold. Payroll software like Xero, QuickBooks, and BrightPay have already released updates for 2025/26.
2. Recalculate staff costs
Run payroll simulations using your 2024/25 data to project 2025/26 expenses. Identify how the NI increase will affect different departments or pay brackets.
3. Review employment structures
Review whether part‑time, contract, or flexible arrangements may help manage staffing costs. If you employ seasonal workers, model their NI impact across different pay cycles.
4. Adjust cashflow forecasts
Incorporate NI changes into quarterly forecasts. This helps anticipate peaks in liability and ensures adequate working capital to cover payroll.
5. Seek professional advice
Your accountant can help you restructure benefits, utilise allowances, and explore tax-efficient salary packaging. A review now can prevent reactive decision-making later.
Example: A small catering business could forecast higher summer staffing costs when events season peaks, adjusting invoices and pricing ahead of time.
Tools and services to help with compliance
Accurate payroll management is essential for compliance and transparency. The right tools simplify updates and reduce manual errors.
Recommended tools and services:
- Payroll software: Xero Payroll, QuickBooks Payroll, or BrightPay for real-time NI and PAYE calculations.
- Accounting support: Fusion Accountants Payroll Services for setup, reporting, and HMRC submissions.
- Tax planning services: Fusion Tax Advisory for optimising NI, salary, and dividend structures.
- Benefit in kind guidance: Benefits in Kind Blog for insights into non-cash benefits and their tax implications.
Tip: Automating payroll reporting can help reduce errors and make it easier to meet filing deadlines, especially during busy periods.
Final thoughts
The April 2025 National Insurance changes are a significant shift for employers, particularly smaller businesses with tight margins. For SMEs, preparation is the best defence — from reviewing budgets to leveraging available allowances.
Working with a professional accountant or payroll specialist ensures compliance, reduces risk, and can even uncover opportunities for cost optimisation. Taking action before April 2025 will help you maintain stability, meet obligations, and continue investing in your people.
FAQ’s: Employer National Insurance 2025/26
What are Employer National Insurance contributions?
Employer National Insurance contributions are payments made by employers on behalf of their employees. They help fund state benefits such as pensions, maternity pay, and statutory sick pay.
How much is Employer National Insurance in 2025/26?
The Employer National Insurance rate has increased to 15% from 13.8%, with contributions starting on earnings above £5,000 per year.
Who qualifies for the Employment Allowance?
Small businesses with an employer National Insurance bill below £100,000 in the previous tax year can claim up to £5,000 off their total contributions.
How can employers reduce National Insurance costs?
Employers can claim the Employment Allowance, use tax-efficient benefit schemes, or optimise their salary structure to minimise National Insurance liability.
When do the new National Insurance rules take effect?
The new rates apply from 6 April 2025 for the 2025/26 tax year. Employers should update their payroll systems before this date.
