What the Employer National Insurance Changes Mean for Your Business

04 May What the Employer National Insurance Changes Mean for Your Business

Now that we’ve crossed into the new tax year this April 2026, the reality of the recent Autumn Budget is starting to show up on balance sheets across the UK. For many of our clients here at Harrison’s Accountancy, the biggest talking point hasn't been the weather or the football, it’s been the significant shift in Employer National Insurance Contributions (NICs).

If you’ve been looking at your latest payroll run and wondering why the numbers look a bit "off," or if you're trying to figure out how to budget for the rest of the year, you’re certainly not alone. These changes represent some of the most significant shifts in employment costs we’ve seen in years, particularly for small businesses that rely on part-time or lower-paid staff.

Let’s break down exactly what has changed, how the "double hit" works, and, most importantly, what you can do to navigate it.

The Three Pillars of Change

What exactly happened to the rules on April 6th?

There are three main moving parts to the new National Insurance landscape. To understand the impact on your business, you need to look at all three together, rather than in isolation.

1. The Rate Increase: The rate of Employer NICs has increased from 13.8% to 15%. This 1.2 percentage point jump applies to all earnings above the secondary threshold.
2. The Lower Secondary Threshold: This is the big one. Previously, you only started paying Employer NICs once an employee earned £9,100 a year. That threshold has now been slashed to £5,000.
3. The Employment Allowance Boost: To help cushion the blow, the Employment Allowance (the amount you can offset against your NIC bill) has been increased from £5,000 to £10,500. Additionally, the previous £100,000 eligibility cap has been removed, making it accessible to more businesses.

While the increase in the Allowance is great news, for many employers, especially those with more than a handful of staff, the lower threshold and higher rate will still result in a net increase in costs.

Why the Lower Threshold is the Real "Game Changer"

Why is a lower threshold more impactful than a higher percentage rate?

Most of the headlines focused on the move from 13.8% to 15%, but for small businesses, the reduction of the Secondary Threshold to £5,000 is where the real pressure lies.

Think of it this way: for every single employee earning over £9,100, you are now paying 15% on an additional £4,100 of their salary that used to be "free" of Employer NICs. That’s an extra £615 per employee right off the bat, before you even consider the higher percentage rate on the rest of their wages.

For businesses with a large number of part-time workers, think cafes, retail shops, or cleaning companies, this change is particularly felt. Previously, a part-time staff member earning £8,000 a year cost the business nothing in Employer NICs. Now, that same employee will trigger a National Insurance bill on the £3,000 they earn above the new £5,000 limit.

Doing the Maths: A Real-World Example

Let’s look at how this actually affects the "cost of a seat" in your office or shop.

To make this clear, let’s compare an employee earning a salary of £30,000 in the 2024/25 tax year versus the current 2026/27 tax year.

• Old Rules (Pre-April 2025/26): You paid 13.8% on everything over £9,100.

  • £30,000 – £9,100 = £20,900.
  • 13.8% of £20,900 = £2,884.20 per year.

• New Rules (April 2026): You pay 15% on everything over £5,000.

  • £30,000 – £5,000 = £25,000.
  • 15% of £25,000 = £3,750.00 per year.

In this scenario, that one employee now costs you an extra £865.80 per year. If you have five employees on that salary, your annual costs have just jumped by over £4,300. This is why many directors are currently reviewing their accountancy services to see where else they can find efficiencies.

The Saving Grace: The Employment Allowance

Is there any good news for the smallest businesses?

Yes! We don’t want to be all "doom and gloom." The government recognised that the threshold change could sink very small micro-businesses, which is why the Employment Allowance was more than doubled to £10,500.

If you are a small employer with only one or two staff members, there is a very good chance that the increased Allowance will cover your entire Employer NIC bill for the year. For example, if you have two employees earning £25,000 each, your total NIC bill might be around £6,000. Because the Allowance is now £10,500, you wouldn't actually pay a penny in Employer NICs.

However, once your team grows beyond a certain point, you will likely exceed that £10,500 "buffer," and that’s when the new 15% rate and £5,000 threshold really start to bite. If you're currently recruiting for a new role, it’s vital to factor these updated costs into your budget.

Impact on Part-Time and Lower-Paid Staff

How does this affect your hiring strategy going forward?

As we mentioned earlier, the lower threshold hits businesses with part-time staff the hardest. Under the old rules, employing two people at £9,000 each cost the business £0 in Employer NICs. Under the new rules, those two people will cost the business a combined £1,200 in NICs (£5,000 threshold vs £9,000 salary = £4,000 taxable @ 15% = £600 each).

This creates a bit of a headache for sectors that rely on flexibility. It might lead some businesses to prefer one full-time employee over two part-timers to minimise the "threshold hit," though that obviously comes with its own set of HR and operational challenges.

We’re also seeing this coincide with other pressures, like the minimum wage increases. When you combine a higher hourly rate with a higher tax bill for the employer, the "cost of employment" is at an all-time high.

What Should You Do Now?

Practical steps to manage the transition.

We know this is a lot to take in, especially when you’re busy trying to actually run your business. Here are a few practical things you can do right now to keep things on track:

1. Review Your Pricing: If your employment costs have gone up by 5% or 10% across the board, can your current profit margins absorb that? It might be time for a gentle price increase to ensure your business remains sustainable.
2. Check Your Allowance Eligibility: Most businesses are eligible for the Employment Allowance, but there are exceptions (like if you’re the sole director and have no other employees). Make sure your payroll software is correctly configured to claim the full £10,500.
3. Update Your Cash Flow Forecasts: Don’t wait until the end of the quarter to realise you’re short on cash. Update your projections now to include the higher NIC payments.
4. Consider Salary Sacrifice: Schemes like pension salary sacrifice can be a win-win. They reduce the employee’s gross pay (saving them tax and NI) and reduce your Employer NIC bill simultaneously. If you haven’t explored this yet, it’s a great time to start.

We’re Here to Help

You don’t have to crunch these numbers alone.

At Harrison’s Accountancy, we pride ourselves on being more than just people who "do the books." We’re here to help you understand the "why" and the "how" behind the numbers. If you're worried about how these National Insurance changes will impact your bottom line, or if you want us to run a specific projection for your team, please contact us.

Whether you’re a long-standing client or you’re just looking for some advice on how to handle the new tax year, we’re always happy to have a casual chat over a coffee (or a Zoom call!). You can also find more updates and tips on our blog.

The landscape has changed, but with a bit of planning and the right support, your business can absolutely stay resilient. Let’s make sure you’re prepared for the year ahead.

Disclaimer: This post is for general information purposes only and does not constitute professional advice. Tax laws are subject to change, and you should always consult with a qualified accountant regarding your specific circumstances. For more details on how we handle your data, please see our privacy policy and terms and conditions.