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Employer’s National Insurance Contributions (NICs)
From 6 April 2025, employer NIC rates will rise from 13.8% to 15%, and the secondary threshold will drop from £9,100 to £5,000. However, the Employment Allowance will increase to £10,500 (from £5,000), providing significant support for small employers. Large employers will also benefit, as the cap restricting the allowance to businesses with less than £100,000 NIC bills will be removed. But this allowance won’t apply to personal companies with just one director-employee.
There’s no change for under-21s, apprentices under 25, new employees at Special Tax Sites, or armed forces veterans in their first civilian job, providing stability and predictability for employers.
Impact on Employers
For example, employer NIC for a worker earning £20,000 will jump from £1,504.20 in 2024/25 to £2,250 in 2025/26 (before applying for the Employment Allowance). This will increase the costs for companies, including small family businesses, to extract salaries.
Class 1A and 1B NICs
Class 1A NICs (on taxable benefits like termination payments) and Class 1B NICs (on PAYE Settlement Agreements) will also rise to 15% from 6 April 2025, aligning with the new secondary NIC rate.
Employee NICs
Employee NIC rates remain the same: 8% (main rate) and 2% (additional rate) for 2025/26. Thresholds like the primary threshold (£12,570) and the upper earnings limit (£50,270) are frozen until 2028, but the lower earnings limit will rise slightly from £123 to £125 per week.
Self-Employed NICs
No changes to Class 4 NIC rates: 6% (main) and 2% (additional). The lower profits limit stays at £12,570, and the small profits threshold will increase to £6,845. Class 2 NICs, for state pension qualification, will rise from £3.45 to £3.50 per week.
Voluntary Contributions
Class 3 voluntary NICs, used to fill state pension gaps, will increase slightly from £17.45 to £17.75 per week.
Income Tax
Income tax rates and thresholds remain unchanged for 2025/26. The personal allowance stays at £12,570, with thresholds frozen until 2028. While inflation-linked pay rises might push earners into higher tax bands (a “stealth tax”), thresholds will rise with inflation starting in April 2028.
This budget introduces cost increases for employers but offers relief for smaller businesses through the higher Employment Allowance. Meanwhile, tax thresholds remain static, impacting workers as wages grow.