National Insurance contributions

Employees and employers

The government announced that it will increase the employer rate from 13.8% to 15% from 6 April 2025. The main rate of Class 1 employee National Insurance contributions (NICs) is 8%.

The Secondary Threshold is the point at which employers become liable to pay NICs on an individual employee's earnings and is currently set at £9,100 a year. The government will reduce the Secondary Threshold to £5,000 a year from 6 April 2025 until 6 April 2028 and then increase it by Consumer Price Index (CPI) thereafter.

The Employment Allowance currently allows businesses with employer NICs bills of £100,000 or less in the previous tax year to deduct £5,000 from their employer NICs bill. From 6 April 2025 the government will increase the Employment Allowance from £5,000 to £10,500 and remove the £100,000 threshold for eligibility, expanding this to all eligible employers with employer NIC bills.

Comment

For some businesses, this will create a large additional NICs cost from April 2025. It remains to be seen what the implications are for both the economy and the job market.

The self-employed and NICs

From 6 April 2025 the rates of Class 4 self-employed NICs are 6% and 2%. For Class 2 NICs from 6 April 2025:

• Self-employed people with profits of £6,845 and above get access to contributory benefits, including the State Pension, through a National Insurance credit, without paying Class 2 NICs.
• Those with profits under £6,845 and others who pay Class 2 NICs voluntarily to get access to contributory benefits including the State Pension will continue to be able to do so.

For those paying voluntarily, the government will also increase Class 2 and Class 3 NICs to £3.50 and £17.75 respectively for 2025/26.