National Insurance is changing:
Here's what you need to know
(and how to get ahead of it)

Big changes are coming to National Insurance in April 2025, and they could affect your staff costs – and your bottom line. But don’t worry – we’ve broken it all down and included a few helpful ideas to soften the blow.

So, what’s changing?

From 6th April 2025, employers will have to pay a higher rate of National Insurance on what they pay their staff.

•  The employers’ NIC rate is going up from 13.8% to 15%.
• Employers will also start paying NI earlier – the threshold is dropping from £9,100 to £5,000.
  
  

In short: you’ll be paying more, and sooner.

Any good news?

Yes! To help balance things out a little:

• The Employment Allowance (which reduces your NIC bill) is increasing from £5,000 to £10,500.
• And it’ll be open to all businesses, not just those that meet certain criteria like before.
  
  

This will be especially helpful for smaller businesses, but for many, this change still means higher overall costs.

How can I reduce the impact?

One option worth exploring is something called Salary Sacrifice. (Don’t worry, it’s not as scary as it sounds.)

What is Salary Sacrifice?

Think of it as a win-win for you and your team. With Salary Sacrifice, employees agree to give up part of their salary in exchange for certain benefits – like pension contributions, electric company cars, or tech equipment. Because their official salary is lower, you both pay less in National Insurance.

Here are some common Salary Sacrifice perks:

• Extra pension contributions
• Electric vehicle salary sacrifice schemes (very tax-efficient!)
• Cycle-to-work schemes
• Technology (like laptops and phones)
  
  

Of course, some benefits come with a Benefit-in-Kind (BIK) tax – like company cars – so it’s worth getting advice before setting anything up.

What kind of savings are we talking?

Let’s look at a simple example with an employee earning £40,000 a year, contributing 5% to their pension:

These savings add up fast if you have multiple employees on similar packages.

Quick heads-up: You can’t use Salary Sacrifice to reduce someone’s wage below the National Minimum Wage – so it’s not suitable for everyone.

Let's talk about it

If you’re wondering how these changes will affect your business, or you’d like to know more about Salary Sacrifice schemes and how they work in real life, our Tax Team would love to help. No jargon, just friendly advice.