Employer NI Changes for 2025-26 Tax Year

Richard Jackson - 18/03/2025

Employer NI Costs Are Rising in 2025/26

With the 2025/26 tax year approaching, businesses need to prepare for key changes that will impact payroll costs. Increases in the National Minimum Wage, a higher Employers' National Insurance (NI) rate, and a lower NI threshold mean that many businesses will see a rise in employment costs.

Here’s a breakdown of the key changes and what they could mean for your business.

National Minimum & Living Wage Increases

From 6 April 2025, the National Minimum Wage and National Living Wage will rise as follows:

Category of Worker	2024/25	2025/26	Increase
Aged 21+ (National Living Wage)	£11.44	£12.21	6.7%
Aged 18-20	£8.60	£10.00	16.3%
Aged under 18 / Apprentices	£6.40	£7.55	18%

These increases reflect the government’s ongoing commitment to raising wages, particularly for younger workers.

Employers' National Insurance: Higher Costs Ahead

Lower NI Threshold Means More Taxable Earnings

From 6 April 2025, the threshold at which employers start paying National Insurance will drop:

Tax Year	Weekly	Monthly	Annual
2024/25	£175	£758	£9,100
2025/26	£96	£417	£5,000

This means more of your payroll will be subject to NI contributions.

Employers' NI Rate Rising to 15%

The Employers’ NI rate is also increasing from 13.8% to 15%, adding further costs to businesses.

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Employment Allowance: A Boost for SMEs

To help offset rising payroll costs, the Employment Allowance is increasing from £5,000 to £10,000 in 2025/26. This allows eligible businesses to reduce their total Employers' NI liability by up to £10,000 per year.

📌 If you’re a payroll client of ours, we will automatically claim this for you via your payroll.

Real-World Impact: How Much Will This Cost You?

Let’s take a typical 19-year-old employee, Fred, working 37.5 hours per week, and see how much his employment costs will increase in 2025/26.

In 2024/25:

Fred’s hourly wage: £8.60
Annual salary: £16,770
Employers’ NI contribution: £0 (below U21 threshold)

✅ Total employer cost: £16,770

In 2025/26:

Fred’s hourly wage: £10.00
Annual salary: £19,500
Employers’ NI contribution: £0 (below U21 threshold)

🚨 Total employer cost: £19,500

📌 Increase in cost: +£2,730 per employee

For businesses with multiple employees, these increases can add up quickly.

Plan Ahead & Reduce Your Costs

With employment costs rising, now is the time to review your payroll strategy. Here’s what you can do:

✔️ Check your eligibility for the Employment Allowance – it could save you up to £10,000 on NI.
✔️ Consider pay structures – could bonuses or salary sacrifice schemes help manage costs?
✔️ Plan your hiring budget – review your workforce expenses ahead of April 2025.

📩 Need help navigating these changes? Get in touch with us today for tailored payroll advice and tax planning strategies to keep your business running smoothly. Book a FREE Consultation Today