The recent changes to national insurance contributions in the UK have implications for small businesses. These adjustments, announced in the Chancellor’s Budget, aim to support economic growth while balancing the needs of the workforce and the government’s financial responsibilities.
What has changed?
From April 2024, the rate of employer national insurance contributions remains at 13.8%. The employment allowance, which offers relief to small employers, continues to be a good support tool. Eligible small businesses can claim up to £5,000 off their employer NI bill each tax year. There have been no increases to this threshold, which will be welcomed by many trying to manage the rising costs; however, the bigger shift has been in employee national insurance, which was cut in 2024.
This doesn’t directly affect what small businesses pay; however, it could boost employee morale and disposable income, helping with staff retention and recruitment. The changes announced in the Budget are forecast to raise between £23.8bn and £25.7 bn a year for the five years from 2025/26 to 2029/30.
What does this mean for small businesses?
If your business qualifies for the employment allowance, you will continue to benefit from reduced NI bills. This can free up funds. For businesses just above the allowance threshold or those employing more staff, the full 13.8% rate still applies. This makes accurate payroll forecasting and budgeting essential.
For businesses below the £100,000 NI threshold for the employment allowance, hiring new employees could be more financially viable thanks to the support on offer. With employee NI cuts boosting take-home pay, small businesses can highlight this as a plus during recruitment.
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Seek advice from an accountant
While employer NI rates haven’t changed, the availability of the employment allowance and cuts to employee NI provide some relief to small businesses. It is a good time for employers to review their payroll structure, claim all the allowances, and seek advice from an accountant.
