Starting April 6, 2025, UK businesses will see a rise in National Insurance (NI) expenses as part of upcoming tax changes. The employer NI rate will increase from 13.8% to 15%, while the secondary threshold—the earnings level above which NI contributions are required—will drop from £9,100 to £5,000 annually (£417 monthly). These changes mean businesses will incur higher payroll costs for employees earning over £5,000 per year, impacting overall operational expenses and financial planning. Novuna Business Cash Flow, a leading provider of cash flow finance solutions to SMEs and corporate entities across the UK, have produced an up to date, free to use 2025 national insurance calculator to help employers navigate this increase.
National Insurance Adjustments for 2025/26
For business owners and investors, understanding these changes is crucial for strategic financial planning. Here are the key updates set to take effect:
- Employer NI Rate: Rising to 15% for earnings above £5,000 per year.
- Employee NI Rate: Typically remains at 12%, depending on category.
- Secondary Threshold: Lowered to £5,000 annually (£417 monthly).
- Financial Impact Example: A Category A employee earning £30,000 annually will now cost their employer approximately £3,749 in NI contributions—marking a significant increase in payroll expenses.
National Insurance Categories: What Employers Need to Know
Ensuring employees are correctly classified is essential for accurate NI deductions. Different categories apply based on factors such as age, employment type, and previous job history:
| NI Category | Employee Group |
|---|---|
| A | Default category for most employees |
| B | Married/widowed women eligible for reduced NI contributions |
| C | Employees over the State Pension age |
| H | Apprentices under 25 |
| J | Employees with multiple jobs paying NI elsewhere |
| M | Employees under 21 |
| V | Army veterans in their first civilian job |
| Z | Employees under 21 with another job contributing to NI |
Most employees fall under Category A unless specific criteria dictate otherwise.
Preparing for the Financial Impact
For businesses and investors, these NI changes will have direct implications on labor costs, profitability, and cash flow management. Employers should consider using payroll forecasting tools, such as the National Insurance Calculator, to assess their upcoming financial obligations and ensure compliance with the new tax framework.
By planning ahead, businesses can mitigate financial strain and maintain stable growth despite rising employment costs.
