
Upcoming changes, originally announced in the Autumn Budget, will likely have a big impact on businesses in 2025.
In October, the Chancellor, Rachel Reeves, announced adjustments to Employer National Contributions (NICs), alongside increases to the National Minimum Wage (NMW). It’s led to many businesses expressing concern about what this will mean for businesses when they come into effect this April.
These concerns have grown following the confirmation that the UK economy shrank during the months of September and October. Whilst it did rise in November, it was less than expected, with many suggesting that there was a link between this and the measures due to be introduced in April.
We have explained each one below, alongside the impact that they will have on your business.
What’s changing in April 2025?
The big changes to employers' wage costs have 4 elements:
1. Employer Contributions will start earlier
The threshold when employers start paying NIC contributions on an employee’s salary will drop from £9,100, to £5,000, meaning businesses will start paying towards an employee’s NI earlier than they have done previously and this applies to both existing and new employees.
2. Employer NIC Contribution threshold lowered
The contribution that employers pay on their workers earnings above the new threshold will increase to 15% (up from 13.8%) .
The impact
The above two elements had the most people talking after the announcement and when you calculate the numbers, it’s easy to see why.
If we take the average UK salary (£37,340), a business will see the following changes for that employee:
Monthly NI Liability 24/25 - £324.76
Monthly NI Liability (from April 2025) - £404.25
Over 12 months, the company would face a raise of an additional £953.40 a year for that employee based on their salary staying the same.
3. Employment Allowance increase
There is good news for smaller businesses. To help ease the tax burden, it was also announced that as part of these changes, the Employment Allowance will increase from £10,500 a year, up from the current allowance of £5,000.
The impact
Put simply, the extra allowance would cover the increased cost of 5.8 employees in the above example.
4. Minimum wage increases
The announcements in the budget didn’t stop with NICs, as the National Minimum Wage (NMW) will also see an increase. The hourly increase to each category is explained below:
- 21 and over – £12.21 an hour (previously £11.44)
- 18-20 - £10.00 an hour (previously £8.60)
- Under 18 and Apprentices - £7.55 an hour (previously £6.40)
The impact
The difference in the hourly rate is evident, but what isn’t as clear is how this will additionally affect the changes to Employer NICs.
It’s been suggested that those in low-wage sectors are more likely to feel the burden of NIC, as they will be more greatly impacted by the statutory increase of NMW. To try and explain this in more detail, we have included an example below based on an over-21, working 40 hours per week:
Current Salary: £23,795.20
Salary from April: £25,396.80
With their Employer NIC changing to:
Annual NI Liability 24/25: £2,027.94
Annual NI Liability from April: £3,059.51
Over the course of a year, that means you’ll be paying, for that individual, an additional £2,633.17 in both salary and Employer NICs.
Build resilience in your business, for now, and the future
As we start a new year, it’s important to prepare for these upcoming changes, building resilience to ensure your business is in a strong position for when they are rolled out in April.
Book on to our upcoming webinar
Building resilience within your business can ensure that, whilst these changes are felt, you are doing everything you need to ride out the storm and be in a stronger position as a result.
Our partners DJH will be hosting a webinar on Thursday 27 February which looks at strategies that you can implement to build resilience in your business.
This webinar would be perfect for those who:
- Want to learn more about strategies which you can undertake to not only build resilience in your business but take steps for it to thrive in the future.
- Are unsure of what the changes announced in the budget will mean for their business in the short, medium and longer term.
You can book your place via their event page here - Future-Proofing Your Business: Preparing for upcoming NIC & NMW Changes