Budget October 2024 - National Insurance

Perhaps the biggest announcement in the Budget was the increase in the Class 1 rate of Employer National Insurance Contributions (NICs). The various adjustments, to take effect from 6 April 2025 are summarised as follows:

Rate
The rate of Employer NICs has increased from 13.8% to 15%. This includes the rate upon which Employer NICs are paid on taxable benefits (Class 1A NICs).

Threshold
The secondary threshold upon which Employer NIC become payable has reduced from £9,100 to £5,000.

Employment Allowance
For those employers eligible to claim the Employment Allowance (unfortunately this does not include the ‘single director’ payrolls), there will be some relief to the rate rises as the Employment Allowance has increased from £5,000 to £10,500, meaning that Employer’s NICs will not be due on the first £10,500 of Employer’s NICs in a tax year. Those employer’s who couldn’t previously claim the Employment Allowance due to their total Employer NIC bill being in excess of £100,000 will now be able to claim the allowance as this threshold has been removed.

Impact
Clearly the biggest impact will be for those businesses who have a number of employees with an Employer’s NIC bill in excess of £10,500.

For those businesses who are eligible to claim the Employment Allowance and have an Employer NIC bill below £10,500, there will be no adverse impact, with some businesses actually paying less Employer’s NIC than before.

For Limited company businesses who run a payroll with just the one director, the annual Employer NIC bill will increase from £479 to £1,136. With corporation tax relief available on both the salary and the Employer’s NICs paid, in many cases, it will still make ‘tax sense’ to pay a salary equal to the personal allowance of £12,570.

From April 2025, the Lower Earnings Limit (LEL) will increase to £125 per week (equivalent to £6,500 per annum). This is the minimum salary required to gain a credit for certain state benefits, including the state pension.