Approximation for Employer’s National Insurance from April 2025

It was announced in the budget today that from April the employer’s National Insurance contributions will be increased from 13.8% to 15%.  It was also announced that the secondary threshold is reducing from £9100 per year to £5000.

This has caused some concern but the impact will be mitigated to an extent for small and medium enterprises by the raising of the employment allowance to £10 500 and the removal of the current cap.

National Insurance is not straightforward.  The bands applied are per pay period and there are different thresholds for employers and employees as well as different categories for when the thresholds and rates apply.  Directors also have their own methods but in the last tax period of the year the annual thresholds and rates are applied.

Estimate the new Employer’s National Insurance Liability

If you want a rough estimate of the employer’s Ni contribution from April 2025 there are a few methods that will give a reasonable estimate:

1.      Take a current Employer NI bill

((Employers National Insurance / 0.138 ) + (number of employees x difference in threshold)) x 0.15 = new liability

2.      Look at the annual pay subject to NI and derive an approximate Employer’s NI liability

(Pay subject to NI – (number of employees x £5000)) x 15%

3.      Take a spreadsheet with each employee’s pay subject to NI eg a gross to net

a.      Remove those employees with zero employer’s NI categories eg M or H

b.     Deduct the appropriate threshold ie £5000/number of paydays in the year

c.      Calculate 15% on the remaining pay

In any method you can deduct the £10 500 employment allowance or leave it in until full details are available. 

Pay subject to NI is available on our PAYE year to date report and the Employer’s NI is shown on our employee summary report.  Individual employee pay subject to NI values are probably simplest from our csv gross to net report.

Examples

There are also NI tables that can be used but these will not be available yet for the new threshold and rate and so will not be used here

1.     Looking at an individual employee

Consider a monthly payroll and the employee has earned £2500 subject to NI in the month:

Current position - Employer’ NI = (employee salary – NI secondary threshold) x 0.138

= (2500 – 758) x 0.138 = £240.40

From April 2025 – Employer’s NI = (employee salary – NI secondary threshold) x 0.15

= (2500 – 416.67) x 0.15 = £312.50

              Increase approximately 30%

2.     Looking at a small company for a full year

We will look at the full years figures to March 2024, all employees are NI category A and all earn a regular salary above the National Insurance threshold.  There are 20 employees

Current position

Employer’s NI   = (pay subject to NI – secondary threshold x number of employees) x 0.138

= (700000 – (9100 x 20)) x 0.138 = £71 484

For eligible employers; liability = £71 484 – employment allowance

= £71 484 - £5000 = £66 484

From April 2025

Employer’s NI   = (pay subject to NI – secondary threshold x number of employees) x 0.15

= (700000 – (5000 x 20)) x 0.15 = £90 000

              For eligible employers; liability = £90 000 – employment allowance

                           £90 000 - £10 500 = £79 500

              Increase approximately 20%

3.     Look at a current period Employer’s National Insurance Liability

We will use 20 employees, assume they are all NI category A and are all above the current secondary threshold

Current position

Employer’s NI = £6000

From April 2025

Employers NI    = ((Current Employers NI / 0.138) +( (current secondary threshold – new) x number of employees) )) x 0.15

= (6000/0.138 + ((758 – 417) x 20))) x 0.15

                     = £7544.74

         Increase approximately 26%

Appendix

• The employment allowance is an allowance and is used to offset Employer’s National Insurance.  A small employer with less than £10000 of liability may find themselves better off with no longer having to pay anything.  You cannot claim unused allowance from HMRC.

• The current rates and thresholds are available here - https://www.gov.uk/guidance/rates-and-thresholds-for-employers-2024-to-2025

• The threshold we are interested in for this exercise is the upper secondary threshold

£175 per week

£758 per month

£9,100 per year

From April 2025 they will be derived from £5000 so subject to rounding will be

£96 per week

£417 per month

£5000 per year

• For accurate figures see HMRC once they are released for next year.

• Pay subject to NI used to be fairly straightforward but now can be affected by pensions and benefits in kind and other salary arrangements and payments so do not assume it is the same as total gross or total taxable pay