Employer NICs Just Got More Expensive

If you run a UK business, your payroll costs likely just increased.

In April 2025, two significant changes to Employer National Insurance Contributions (NICs) came into effect. And for many small businesses, the impact won’t be minor—it could mean paying hundreds more per employee each year.

Here’s what changed, why it matters, and what you can do to protect your bottom line.

What Changed in April 2025?

First, the employer NIC rate increased from 13.8% to 15%. This is the percentage you pay on employee earnings above the standard threshold—so you’re now paying a higher rate for the same wages.

Second, the threshold itself was lowered. Employers used to begin paying NICs when an employee earned more than £9,100 per year. That threshold has now dropped to just £5,000. As a result, a larger portion of each employee’s income is now subject to NICs.

The combined effect? You’re now paying more NICs, on more of your employees’ pay.

The One Bit of Good News: Employment Allowance

To help offset this increased cost, the government has raised the Employment Allowance from £5,000 to £10,500. This allowance is used to reduce your annual NIC bill.

Importantly, the government has also removed the previous restriction that blocked businesses with over £100,000 in NIC liability from claiming the allowance. More businesses are now eligible—and the benefit is larger.

If you outsource payroll, this allowance should be automatically applied. If you manage payroll in-house or through software, it’s worth double-checking that you’re claiming it correctly.

What You Should Do Next

If you manage payroll internally, these updates need to be applied manually. This includes updating thresholds, rates, and confirming you’re properly claiming the Employment Allowance.

If you’re using software, make sure it has already been updated to reflect the new NIC rules. Not all platforms update automatically or apply allowances without user action.

If you outsource payroll and haven’t heard from your provider about these changes, it’s worth reviewing whether they’re truly on top of your compliance needs.

At Intelligent Payroll, we’ve already implemented all the changes for our clients—quietly and correctly, behind the scenes. That’s what outsourcing should look like.

Is It Time to Rethink How You Handle Payroll?

For many businesses, these changes are a prompt to reconsider how payroll is managed.

Outsourcing can reduce overall costs (often by 35% or more compared to in-house processing), improve accuracy, and remove the stress of keeping up with evolving legislation. And when changes like these happen, our clients don’t need to lift a finger—we handle it all.

Final Thought

Payroll legislation is always shifting. The real question is: do you want to stay on top of it yourself—or have someone else do it for you?

If you’re ready to take payroll off your plate for good, get in touch with us. We’d be happy to show you what hassle-free, compliant payroll really looks like.