Get in touch; we would love to help.
13 November 2024
Employer NIC – What is the impact on your business?
Significant changes to employment taxes were outlined in the recent Autumn Budget, concerning both the Employer National Insurance contributions (NIC) and Employment Allowance. Starting in April 2025, these changes will have a significant impact on the cost of employment for businesses across the UK.
In days following the budget, Reeves has been criticised for her decision to increase the rates, which will see employers pay national insurance contributions (NIC) on an employee’s earnings above £5,000 at the rate of 15%.
To help protect smaller employers from the increase in NIC, the amount of the employment allowance will be increased from £5,000 to £10,500 per year from 6 April 2025.
While the Chancellor states she is not immune to the criticism, she said, “We’ve got to raise the money to put our public finances on a firm footing.” The NI rise for employers is set to raise more than £20bn a year, making it one of the biggest single tax-raising measures in history.
How can we help you and your business?
We understand this is an unsettling time to be an employer; the current situation will not suit all, and larger employers are likely to be hit the hardest. While the changes may seem straightforward, the actual impact on your business depends on various factors, including employee salary levels, eligibility for Employment Allowance, and individual circumstances. We strongly recommend reviewing your remuneration planning well ahead of April 2025 to ensure you’re positioned for the best outcome.
To support employers, our Payroll team has designed an Employer NIC calculator to use to forecast the increased cost of employment for employers NIC. This also includes the change to employment allowance, whereby the £100K limit is removed and the annual allowance increased to £10,500.
Click here to access the free Employer NIC Calculator
What does the Employer NIC Calculator do?
Our new tool is designed to make it easy for you to assess the financial impact of the upcoming NIC changes and Employment Allowance adjustments. It’s simple to use and can provide you with valuable insights:
- Select the pay frequency (weekly, monthly, fortnightly, or 4-weekly).
- Enter employee details and pay information (you can use your most recent payroll reports to ensure accuracy).
- Calculate the NIC impact for both the 2024/25 and 2025/26 tax years.
- The tool annualises the data, providing you with an estimate of the annual increase in NIC costs, helping you plan effectively.
You can easily use the tool to self-populate the necessary information or, if you’d prefer, we can assist you with this process for a minimal fee.
Other Payroll considerations
Employers should ensure that their payroll systems are ready to handle the increase in national insurance contributions (NIC) and consider wider tax planning efficiencies. In line with these changes, small owner-managed businesses should also seek advice on remuneration planning as current positions may not be favourable from April.
If you would like us to help you with any of these calculations or if you need advice on remuneration planning or salary sacrifice options, our expert team is here to assist. Our wider Tax Advisory Team can provide guidance on how these changes may affect your business and help you make informed decisions that benefit both your company and your employees. Please email info@lbgroupltd.com or call 01206 867 551, and a member of the team will be pleased to help.