How to Calculate Employer’s National Insurance (NI) Contributions – Employer NI Contributions Changes for 2024-2026, Effective April 2025

What Are Employer’s National Insurance (NI) Contributions?

Employer National Insurance (NI) contributions are a key component of the payroll process in the UK. These contributions help fund essential services, including the NHS, state pensions, and unemployment benefits. For employers, understanding how to calculate National Insurance contributions is essential to meet compliance requirements and avoid penalties. This guide explains how to calculate National Insurance, with a specific focus on the employer NI contributions changes effective April 2025.

Overview of Recent Employer National Insurance Changes

The UK government periodically updates National Insurance rates and thresholds to reflect economic conditions and policy shifts. In April 2025, significant changes will affect employer National Insurance contributions.

Below is a summary of the upcoming National Insurance changes:

This table highlights the main National Insurance changes for 2025, showing how the employer NI rate and thresholds will be adjusted to impact payroll expenses.

Increase in Employer's National Insurance Contributions

Starting April 2025, the employer National Insurance contribution rate will increase by 1.2 percentage points, reaching 15%. Additionally, the Secondary Threshold (ST) for employer National Insurance contributions will be lowered, meaning employers will begin paying National Insurance on employees' earnings starting from £5,000, down from the previous threshold of £9,100. These adjustments in National Insurance rates and thresholds are expected to increase the National Insurance contributions for employers, especially those with lower-wage employees, as a larger portion of employee earnings will be subject to National Insurance.

Employer National Insurance Contribution Rates for 2024-2025 and 2025-2026

For financial planning, here is a table showing the Employer NI contribution rates for the 2024-2025 and 2025-2026 tax years:

Understanding these National Insurance rates helps employers plan for future payroll costs accurately, as National Insurance obligations will vary between these years.

Monthly National Insurance Thresholds for 2024-2025 and 2025-2026

Here are the monthly National Insurance thresholds, specifying when both employees and employers begin paying National Insurance contributions. Accurate National Insurance calculations require close attention to these thresholds:

These National Insurance thresholds reflect changes in the Secondary Threshold (ST) for employers in 2025-2026, affecting employer National Insurance obligations.

Example Calculation of Employer and Employee National Insurance for 2024-2025 and 2025-2026

The following example demonstrates how employer and employee National Insurance contributions vary across different salary ranges for the 2024-2025 and 2025-2026 tax years. This comparison helps employers apply the updated National Insurance rates and thresholds for precise National Insurance calculations:

Understanding the Employment Allowance: Eligibility and New Benefits for Employers

The Employment Allowance (EA) is a relief on employer National Insurance contributions. Beginning April 2025, the EA will increase from £5,000 to £10,500. This increase in National Insurance allowance aims to support small and medium-sized businesses by lowering their National Insurance liability. Larger employers, who previously faced an NI liability cap, will now be able to claim the full Employment Allowance, providing significant National Insurance relief.

FAQs on National Insurance Contributions

What is National Insurance?

National Insurance is a UK tax on earnings that funds various state benefits, including the NHS, pensions, and unemployment benefits.

When do employers start paying National Insurance for employees?

Employers start paying National Insurance contributions when employee earnings exceed the Secondary Threshold (ST), set at £758 per month in 2024-2025 and lowered to £416.67 per month for 2025-2026.

How are National Insurance contributions calculated?

National Insurance contributions are based on employee earnings and specific thresholds that differ for both employees and employers. Employers use thresholds such as the Secondary Threshold (ST) and follow rate categories to calculate National Insurance accurately.

How will the 2025 changes impact my business?

The 2025 changes in National Insurance will raise the employer’s NI rate to 15% and reduce the ST threshold, meaning National Insurance will apply to a larger portion of employee earnings. This may increase payroll costs for businesses.

What is the Employment Allowance, and who can claim it?

The Employment Allowance (EA) reduces National Insurance liabilities for eligible employers. From 2025, the EA will increase from £5,000 to £10,000, offering valuable National Insurance savings for SMEs and other eligible employers.