March 4, 2025
By Merranti

Employers’ NICs Increases on the Way – How to Prepare and Reduce Your Costs

From 6 April 2025, businesses across the UK will face a significant increase in employer National Insurance Contributions (NICs). These changes will raise employment costs, particularly for lower-paid workers, and could impact hiring decisions.

However, there are ways to mitigate these costs—read on to understand how these changes affect you and what you can do to reduce the financial impact.

What’s Changing from April 2025?

Higher Employer NICs Rate

The employer NICs rate will increase from 13.8% to 15% on earnings above the secondary threshold.
This applies to all employees earning above the threshold.

Lower Secondary Threshold

The secondary threshold is being cut from £9,100 to £5,000 per year.
This means employers will start paying NICs on earnings above just £5,000 per year, instead of £9,100.

Increased Costs for Businesses

This change has a disproportionate impact on lower-paid employees.
For example:
On a salary of £12,570 (the tax-free personal allowance), employer NICs increase from £479 to £1,136 (+137%).
On a salary of £30,000, employer NICs increase from £2,884 to £3,750 (+30%).

These higher costs come on top of the scheduled increases to the National Living Wage (NLW) and National Minimum Wage (NMW), further increasing payroll expenses.

How Can Employers Reduce NICs Costs?

There are several ways businesses can offset the impact of rising employer NICs.

The Employment Allowance – Now More Generous

From April 2025, the Employment Allowance (EA) will increase from £5,000 to £10,500 per business.
New rule: The previous restriction that businesses with an annual employer NICs bill over £100,000 couldn’t claim EA is being abolished, meaning more businesses will qualify.
If you employ four full-time staff on the National Living Wage, you won’t pay any employer NICs after claiming EA.

Can you backdate EA claims?
Yes! You can backdate claims for the past four years. If you didn’t claim in previous years but were eligible, you may be able to recover previous NICs paid.

Employing Veterans, Young Workers & Apprentices

There is a full exemption from employer NICs when hiring:
Armed Forces veterans in their first 12 months of civilian employment (on salaries up to £50,570).
Workers under 21 (on salaries up to £50,570).
Apprentices under 25 (on salaries up to £50,570).

Action: If you are looking to hire, consider hiring eligible workers to reduce your employer NICs bill.

Freeports & Investment Zones – NIC Exemptions

Businesses in Freeports or Investment Zones benefit from:
Employer NICs exemption on ‘new’ employees for up to 36 months.
Applies to salaries up to £25,000 per year (£481 per week).

Eligibility Requirements:

The employee must be newly employed.
They must spend at least 60% of their working time in the Freeport/Investment Zone.
The employer must have business premises within the designated tax site.

The Labour government has confirmed Freeports and Investment Zones will remain—if you operate in one, ensure you take advantage of this NICs break!

How Merranti Accounting Can Help

The employer NICs increase is a significant cost burden, but we can help you reduce its impact by:
Reviewing your NICs liability and identifying potential savings.
Helping you claim the Employment Allowance (including backdated claims).
Advising on NIC-exempt hiring strategies (veterans, young workers, Freeports, etc.).
Exploring alternative payroll structures to optimise tax efficiency.

Get in touch today to ensure your business is ready for these changes in April 2025. Don’t wait until the increased NICs take effect—plan now to protect your business’s bottom line!

Find more from the spring news letter here