What’s changed for 2025/26 – payroll update on employers’ national insurance

Higher national insurance contributions (NICs) will raise employment costs for businesses from 6 April. Small and medium-sized enterprises (SMEs) will feel this the most. Unlike larger companies, SMEs have smaller profit margins and can’t easily absorb extra costs. They might need to increase prices, reduce pay rises or hire fewer people.

Many don’t know that employers don’t pay NICs for apprentices aged under 25. This can save thousands of pounds per apprentice. The apprentice must be under 25 and earn less than £967 per week (£50,284 a year).

If you hire an apprentice aged 16-18, you can get a £1,000 grant. This helps cover the costs of hiring and training young apprentices.

There are three main changes to employers’ national insurance to be aware of. It’s also important to think about the knock-on effect on your company’s payroll from 6 April:

•  Employment allowance (EA) increase and criteria change
•  Reduction in national insurance threshold for employers (secondary threshold)
•  Increase in employer contributions (secondary class 1 NICs)

The employment allowance will increase from £5,000 to £10,500. The eligibility restriction based on the previous year’s secondary class 1 NICs being less than £100,000 has been abolished. This means more employers will benefit.

Regardless of claims in the previous year, all employers must indicate eligibility on their employer payment summary (EPS) submission for the new tax year.

Who may be eligible?

• A business or charity with registered employees
• Employers of care and support workers
• A business with more than one director earning over the secondary class 1 NICs threshold

Who will not be eligible?

 Public sector bodies or businesses that conduct more than 50% of their work in the public sector (this does not apply to charities)

• Domestic workers, such as nannies or gardeners
• Single-director limited companies

 Reduction in NI threshold

The national insurance threshold for employers (secondary threshold) will be reduced from £9,100 to £5,000. This means that from 6 April employers will be paying NI for a greater number of employees.

Important points

• Any employee earning £5,000 or more per annum will now be subject to employers’ NI. This equates to £417 a month, or £96 a week
• This changes the real time information reporting requirements. Instead of filing the return for employees earning over the lower earnings limit, employers will need to do this for employees earning over the secondary threshold
• If your employee earns over £471 per month, they must be included in the payroll submission to HMRC
• The secondary threshold will be in effect until April 2028

Increase in secondary class 1 NICs rate

The current rate of employers’ national insurance is 13.8%. From 6 April, this will increase to 15%, including both Class 1A & 1B rates.

What this means

• Employers will pay more NI on employees earning over the £5,000 annual threshold. The threshold reduction means employers will be paying NI for more employees and at a higher rate

What has not changed?

• Employers with apprentices under 25 on an approved government apprentice scheme can use category H if earning less than the upper earnings limit of £967 per week. This means there is no employers’ NI due. NI category letter H should be used for these employee
• Under-21s earning up to the upper earnings limit of £967 per week do not attract employers NI. NI category M should be used for these employees

The world of payroll is ever evolving. Therefore, it is important to have an expert level of understanding to avoid costly errors.

If you would like to find out more about outsourcing your payroll, please contact FC Payroll Solutions.