The increase in employer National Insurance contributions from April 2025 was one of the most significant changes to hit UK businesses in recent years. The rate rose from 13.8% to 15%, and the secondary threshold — the point at which employers start paying NI — dropped from £9,100 to just £5,000 per year. For many businesses, this represents a substantial increase in employment costs.
How Much More Does It Cost?
For an employee earning £30,000, the employer NI bill for 2025/26 is approximately £3,750. Under the previous rates, it would have been around £2,885. That is an increase of roughly £865 per employee per year — or about £72 per month.
For higher earners, the impact is even larger. An employee on £50,000 costs approximately £6,750 in employer NI under the new rates, compared to about £5,644 previously. Scale that across a team of 10 or 20 employees, and the numbers become very significant.
The Employment Allowance
There is some relief available. The Employment Allowance allows eligible employers to reduce their NI bill by up to £10,500. This was increased from £5,000 in April 2025 to partially offset the rate increase. To qualify, your total employer NI bill for the previous year must have been below £100,000.
For very small businesses, the Employment Allowance can completely eliminate the employer NI liability. A business with two employees each earning £25,000 would have a total employer NI bill of around £6,000 — fully covered by the allowance.
Strategies for Managing the Cost
Consider salary sacrifice arrangements for pension contributions, cycle-to-work schemes, and other approved benefits. When an employee sacrifices salary in exchange for a benefit, both the employer and employee save on National Insurance.
Review your workforce structure. If you use agency workers or contractors, the employer NI increase does not apply to them directly (though IR35 rules may mean it applies indirectly). This is not a reason to artificially restructure genuine employment relationships, but it is worth reviewing whether your current arrangements are optimal.
Use our employer cost calculator to see the true cost of employing someone, including the new NI rates, pension contributions, and other obligations.
M. Samiuddin QUADRI is a chartered certified accountant at Gladstone & Co. Accountants, advising businesses on employment tax planning and payroll compliance.