National Insurance changes 2025: What employers need to know

Published Wednesday 26 November 2025

Table of contents

• What are the 3 National Insurance changes in 2025?
• What these changes mean for your small business
• How your business can prepare for National Insurance changes
• Getting your payroll ready for the changes
• FAQs on National Insurance

Key takeaways

• Prepare for increased employment costs by calculating the impact of the new 15% employer National Insurance rate (up from 13.8%) and the lowered payment threshold of £5,000 annually (down from £9,100) on your payroll budget.

• Claim the enhanced Employment Allowance of £10,500 (increased from £5,000) to offset higher National Insurance costs, as the previous £100,000 eligibility cap has been removed, making more businesses eligible.

• Update your payroll system to automatically apply the new rates and thresholds from April 2025, ensuring accurate calculations and compliance with HMRC regulations.

• Review your workforce costs immediately, particularly for part-time and lower-paid employees earning between £5,000-£9,100 who will now incur National Insurance contributions where none existed before.

What are the 3 National Insurance changes in 2025?

Three National Insurance changes took effect in April 2025:

• Employer rate increased from 13.8% to 15%
• Payment threshold lowered from £9,100 to £5,000 annually
• Employment Allowance raised from £5,000 to £10,500

These changes increase employment costs but offer greater relief for eligible businesses.

Learn more about National Insurance contributions

1. A higher employer NIC rate

The employer National Insurance contributions (NICs) rate has risen this year, confirmed by ACCA to rise by 1.2 percentage points to a new rate of 15%.

• Old rate: 13.8%
• New rate from April 2025: 15%
• What this means for employers: From the 2025/26 financial year, the cost of employing staff goes up. You'll now pay 15p in National Insurance for every £1 an employee earns above the (now lower) secondary threshold – up from 13.8p.

2. A lower secondary threshold

The secondary threshold for paying National Insurance contributions (NICs) has been lowered to £5,000, a level which is set to remain in effect until 5 April 2028.

• Old rate: £9100 per year
• New rate from April 2025: £5000 per year
• What this means for employers: Your total employment costs will probably rise. From April 2025, employers need to pay NICs for every pound in wages over £5000 per year instead of £9100. This means you'll pay more for each staff member, possibly including part-time staff if you have them.

Learn more about the rates and thresholds

3. A higher Employment Allowance

The Employment Allowance has risen from £5,000 to £10,500 per year, a move designed to help protect smaller employers from rising National Insurance contributions (NICs) costs. The £100,000 eligibility cap has also been removed.

• Old rate: £5000 per year. Employers with over £100,000 in employer NIC liability in the previous tax year were not eligible to claim.
• New rate from April 2025: £10,500 per year with no eligibility cap.
• What this means for employers: From the 2025/26 tax year, all employers (except those with specific exemptions covered below) can claim up to £10,500 off their annual NIC bill. This national insurance reduction will help offset the higher employment costs of the NIC rate rise and the lower secondary threshold.

Check the UK government's Employment Allowance eligibility criteria to see if you're eligible.

What these changes mean for your small business

These changes increase your employment costs by requiring earlier and higher National Insurance payments for each employee, with the Office for Budget Responsibility expecting some firms will end up passing on part of the cost to consumers.

Who's most affected:

• Part-time staff: You'll now pay NICs on wages between £5,000-£9,100
• Lower-paid employees: Earlier NIC liability means higher costs per employee
• Growing businesses: Higher rates apply to all staff earning above £5,000

The Employment Allowance increase to £10,500 can offset these higher costs. If your total employer National Insurance contributions (NICs) are below £10,500, you could reduce your National Insurance liability to zero.

Review your recruitment plans and payroll budgets now, before you hire new staff.

How your business can prepare for National Insurance changes

Preparing for National Insurance changes helps you stay compliant, manage increased costs, and claim available reliefs. Follow these steps to ensure your business is ready.

Review your payroll data

Calculate your new NIC costs using the updated rates and thresholds:

• For each employee earning £5,000 – £9,100, you now pay 15% National Insurance contributions on this amount (previously £0)
• For all employees earning above £5,000, apply the new 15% rate instead of 13.8%
• Add up the additional costs across your workforce to see the full impact

Check your Employment Allowance eligibility

Check your Employment Allowance eligibility – more businesses now qualify due to removed restrictions:

• The £100,000 eligibility cap no longer applies
• You can claim up to £10,500 annually (up from £5,000)
• Apply directly through HMRC or automatically via your payroll software

Even if you weren't eligible before, check again with the new rules. Here's more about the Employment Allowance.

Consider budgets and cash flow

Assess your budget capacity for higher employment costs:

• Multiply affected wages by the 1.2% rate increase and add new threshold costs
• Check your cash flow to ensure your monthly payroll can absorb the extra expense
• Identify cost reductions or arrange short-term funding if costs exceed your budget

Ask your accountant or payroll provider for advice

Ask your accountant how these new rules affect your business, especially for part-time or lower-paid staff. They can help you stay compliant and claim all available reliefs.

Think about automating your payroll

Automate your payroll with Xero Payroll to keep up with new rules and reduce errors. This saves you time and prepares your business for future changes, such as mandatory reporting of certain benefits in kind from April 2026.

See how Xero Payroll can help your business

Getting your payroll ready for the changes

Once you understand the National Insurance changes, the next step is to apply them to your payroll. Ensuring your calculations are accurate is essential for staying compliant and paying your team correctly.

Update your payroll system

Your payroll process, whether manual or automated, must reflect the new rules from 6 April 2025. This includes:

• Applying the new employer NIC rate of 15%.
• Using the lower secondary threshold of £5000.
• Claiming the increased Employment Allowance of £10,500, if you're eligible.

Automate for accuracy

Manually adjusting payroll calculations for each employee can be time-consuming and increases the risk of errors. Payroll software simplifies this process by automatically using the latest rates and thresholds.

With a platform like Xero Payroll, these updates are handled for you. This means you can run payroll with confidence, knowing your calculations are compliant with the latest HMRC regulations, and you're claiming the correct reliefs.

FAQs on National Insurance

Find answers to common questions about the 2025 National Insurance changes below.

Will my employees' take-home pay change?

Employee take-home pay stays the same. The 2025 National Insurance changes only affect what employers pay, not employee contributions or thresholds.

Can all small businesses claim the Employment Allowance?

Most small businesses can claim the Employment Allowance. You're eligible if you:

• Pay Class 1 NICs for employees
• Work primarily in private sector (less than half public sector work)
• Have multiple employees (sole directors need other staff to qualify)

You can only claim one allowance per business group. The £100,000 limit no longer applies from 2025.

Here's more about Employment Allowance eligibility from Gov.uk

When do these changes take effect?

All changes to employer National Insurance came into effect from 6 April 2025 – the start of the new tax year.

I'm self-employed. Do the new rules affect me?

Yes. If you're self-employed and have staff, the new rules apply to you as an employer.