National Insurance changes 2025: guide for employers

Published Thursday 30 July 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
• Set your business up for success with Xero
• FAQs on National Insurance

Key takeaways

• New National Insurance rates for 2025/26 now apply. The employer NICs rate has increased from 13.8% to 15%..
• The secondary threshold – the point at which employers start paying National Insurance for an employee – has dropped from £9100 to £5000.
• The Employment Allowance has risen to £10,500. More businesses can now access this to reduce their National Insurance bills.
• Stay compliant and ready for the rise in employment costs – regularly check HMRC’s latest guidance and get advice from your accountant.

What are the 3 National Insurance changes in 2025?

Three key changes to Class 1 National Insurance contributions (NICs) came into effect in April 2025. Here’s what’s changed and how each update could impact your business.

Learn more about National Insurance contributions

1. A higher employer NIC rate

The employer NIC rate has risen this year by 1.2%.

• 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 NICs has been lowered to £5000.

• 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 £5000 to £10,500 per year. 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

The higher employer NIC rate and lower secondary threshold will increase the cost of employing staff – in particular, part-time workers or those on lower wages – and, therefore, your tax bill. Your cash flow and profit margins could suffer if you haven't budgeted for these changes.

But the increased Employment Allowance offers some welcome relief. Eligible businesses can now claim up to £10,500 off their annual NIC bill – which could even reduce your National Insurance liability to zero if your total employer NICs are below that amount.

So think about your recruitment plans and payroll budgets. Make sure you can cope with your total employment costs before making any hiring decisions.

How your business can prepare for National Insurance changes

Here are a few ways you can prepare for the National Insurance changes.

Review your payroll data

Calculate how the new NIC thresholds and rates affect your NIC liability and your total employment costs.

Check your Employment Allowance eligibility

See if you qualify for the Employment Allowance – even if you didn’t before. You can claim it directly from HMRC or via payroll software like Xero. Here’s more about the Employment Allowance.

Consider budgets and cash flow

Higher employer NICs will raise your employment costs. Can your business absorb the changes? If cash flow is tight, look at where you can reduce costs or access short-term funding.

Ask your accountant or payroll provider for advice

Your accountant can explain how these new rules affect your business, and specifically in relation to part-time or lower-paid staff. They can also make sure you're compliant, claiming all available reliefs, and not paying more than you have to.

Think about automating your payroll

Instead of manually updating your payroll calculations with every rule change, automate your payroll with a platform like Xero to stay on top of the new rules automatically. Doing this reduces the chance of errors and saves you admin time, too.

Here’s how Xero Payroll software can help your business.

Set your business up for success with Xero

Employer NIC rules change often, so stay up to date to make sure you’re paying your team correctly.

• Check the latest guidance from HMRC regularly.
• Talk with your accountant or payroll expert if you’re unsure how any changes apply to your business. A quick conversation today could save you time and money tomorrow.

Some payroll software, including Xero, automatically applies the correct thresholds and rates so you’re always compliant. Learn how Xero can streamline your payroll.

Xero is always up to date with the latest National Insurance regulations – so whether it’s new thresholds, rates, or rule changes, Xero helps you pay your team accurately and on time.

FAQs on National Insurance

When does the new national insurance rate start? Read on for the answer to this and several other questions.

Will my employees’ take-home pay change?

No. The National Insurance changes in 2025 affect employers only. Employee NIC thresholds and rates remain largely unchanged for the 2025/26 financial year. There’s a small increase in the Lower Earnings Limit (LEL), but this doesn’t affect your team’s take-home pay.

Can all small businesses claim the Employment Allowance?

Not all businesses can claim the Employment Allowance. To be eligible, you must be a business (including sole traders with employees and that pay NICs) or charity that employs staff and pays Class 1 NICs, and do less than half your work in the public sector (unless you’re a registered charity). There are other restrictions as well – for example, if you’re a sole director you can’t be the only employee you need to pay NICs for, and only one company in a group of businesses can claim the allowance.

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, potentially. If you're self-employed and have staff, the new rules apply to you – just like any other employer.