In the Autumn Budget 2024, the newly appointed Labour government announced significant changes to National Insurance Contributions (NICs) affecting employers. From April 2025, the rate of employer NICs will increase from 13.8% to 15%, representing a 1.2% rise. Additionally, the Secondary Threshold—the earnings level at which employers begin paying NICs for each employee—will be reduced from £9,100 to £5,000.
These measures are projected to raise £25 billion annually by the end of the forecast period. To mitigate the impact on smaller businesses, the Employment Allowance will be increased from £5,000 to £10,500, enabling approximately 865,000 employers to be exempt from paying NICs altogether.
Here’s a breakdown of the changes and steps you can take to prepare and adapt:
Understanding the changes
The UK government periodically adjusts National Insurance rates and thresholds to reflect economic conditions, policy priorities, or fiscal objectives. Recent changes include:
- Increase in NI contributions
Employers may see a rise in the percentage of NI contributions they are required to pay for their employees. This can increase overall payroll costs. - Threshold adjustments
The thresholds at which employees and employers begin to pay NI may be revised. A higher threshold could reduce liabilities for lower-income workers but shift more responsibility to businesses employing higher earners. - Sector-specific policies
Certain industries, such as health and social care, may experience targeted policies, such as rebates or exemptions, to address sector-specific challenges. - Green initiatives and incentives
Some changes align with sustainability goals, offering lower rates or benefits for businesses investing in green technologies or adopting environmentally-friendly practices.
How can you prepare your business?
1. Review your payroll budget
Conduct a thorough review of your payroll to assess how the changes will affect your bottom line. Identify areas where cost adjustments may be needed to maintain profitability.
2. Strategic workforce planning
Analyse your workforce structure, culture and productivity to identify areas for optimising loyalty and effort without compromising on talent.
3. Update payroll systems
Ensure that your payroll software is updated to reflect the new NI rates and thresholds. This will prevent errors in employee contributions and employer payments.
4. Communicate with staff
Transparency with employees about changes in their NI contributions helps maintain trust. Offer guidance to those who may be affected, particularly if take-home pay is impacted.
5. Seek professional advice
Work with HR consultants, payroll experts or accountants to navigate the complexities of the changes and adjust your financial strategy.
6. Explore government incentives
Investigate whether your business qualifies for reliefs, incentives or grants tied to the new regulations, such as those promoting training, innovation, or sustainability.
Stay Proactive
Keeping up with regulatory changes is an ongoing process. Regularly monitor updates from HM Revenue & Customs (HMRC) and attend industry seminars or webinars to stay ahead.
By planning strategically and implementing these steps, you can mitigate the impact of National Insurance changes and position your business for resilience and success.
Tusk Support delivers practical HR advice to help you navigate these changes. Reach out to us to start the conversation sooner rather than later.
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