In January 2025, the National Insurance Contributions (Secondary Class 1 Contributions) Bill reached the House of Lords Committee Stages. With Royal Assent expected shortly, we explore what this legislation means for businesses and what employers need to consider in the months ahead.
Employers currently pay Secondary Class 1 employer National Insurance Contributions (“NICs”) at 13.8% on the amount by which an employee’s earnings exceed the secondary threshold of 9,100 per year or 175 per week.
From 6 April 2025, employers will face two significant changes:
The Government estimates that these changes will generate an additional 25 billion in annual revenue. However, the Office for Budget Responsibility suggests 60% of increased NICs costs could initially be passed to employees (increasing to 76% long term).
For employers, the immediate impact will be a significant increase in NIC liabilities and how to manage this whilst mitigating any effect on employees.
As a measure designed to support smaller businesses, employers will be able to benefit from an increase in the amount of the annual Employment Allowance, which will be increased from 5,000 to 10,500 from 6 April 2025.
Additionally, the...
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