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    TaxKilnUK tax guidance
    TaxKilnUK tax guidance

    Being an employer → Employer NICs 2025/26

    Employer NICs 2025/26 — 15% Secondary + £5,000 Threshold + Employment Allowance £10,500

    From 6 April 2025 the Class 1 secondary (employer) NIC rate rose from 13.8% to 15%, and the secondary threshold dropped from £9,100 to £5,000 per year. Combined effect on a £30,000 employee: employer NI cost rose from ~£2,884 (2024/25) to ~£3,750 (2025/26) — about 30% more expensive. To offset, the Employment Allowance increased to £10,500 (from £5,000) with the £100,000 NIC bill threshold removed, so all employers (except sole-director-only companies) can claim. Apprentices under 25 and employees under 21 attract zero secondary NI up to the Upper Secondary Threshold (£50,270). Veterans relief extended to April 2026. Freeport + Investment Zone reliefs at £25,000 threshold for up to 3 years.

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    Guidance, not advice. We explain the rules, we don't assess your situation. Always seek financial or tax advice from your accountant, or contact HMRC. Read our editorial scope →

    In plain English

    The single biggest employer-cost change in a decade hit on 6 April 2025: rate up 1.2pp + threshold down £4,100. The threshold change matters more than the rate change for small employers — every £1 of payroll between £5,000 and £9,100 per employee now attracts 15% employer NI where last year it was 0%. Worked example for a £30k employee: 2024/25 cost was 13.8% × (£30,000 − £9,100) = £2,884. 2025/26 cost is 15% × (£30,000 − £5,000) = £3,750. That is a 30% increase in employer NI cost for the same gross salary. The partial offset is Employment Allowance at £10,500 (more than doubled) with the old £100k NIC-bill cap removed — so larger employers can now also claim. But EA is per group of connected companies (not per company), and excludes sole-director-only companies (single director with no other employees). The under-21 / apprentice carve-out and Veterans relief soften costs for those cohorts: zero employer NI up to the Upper Secondary Threshold £50,270. Freeport + Investment Zone employees get zero employer NI up to £25,000 for the first 3 years.

    How it works

    Secondary Class 1 NIC calculation

    Per employee per pay period: secondary NIC = (pay above secondary threshold) × 15%. Secondary threshold £5,000/year = £96/week = £417/month. Threshold is per-employee not aggregated; if employee earns under threshold no employer NI.

    Employment Allowance £10,500

    Claim via EPS each tax year (does NOT auto-renew). Reduces employer Class 1 secondary NIC liability up to £10,500. Once exhausted, employer NI starts being paid. Excluded: sole-director-only companies (no other employees); public sector contracts where >50% income is from public sector (with narrow exceptions). Connected companies: one EA per group (test = control + economic interdependence, FA 2014).

    Under-21 + apprentice (under 25) carve-out

    Zero secondary Class 1 NIC up to Upper Secondary Threshold £50,270 (2025/26). Apprentice carve-out requires the employee to be a recognised apprentice on an approved framework/standard. Mark NI category accordingly (M for under-21; H for apprentice under 25).

    Veterans relief

    Zero employer NI up to UST £50,270 for the first 12 months of a veteran's civilian employment. Currently extended to April 2026 — verify current status before relying. NI category V.

    Freeport + Investment Zone relief

    Zero employer NI up to £25,000 for first 36 months for new employees spending 60%+ of working time within a Freeport / Investment Zone tax site. NI category F (Freeport) / N (Investment Zone). Time-limited regime — Freeports broadly 2022-2031; Investment Zones from 2024.

    Who this applies to + key conditions

    Statute + manual references

    Primary: Social Security Contributions and Benefits Act 1992 + Social Security (Contributions) Regulations 2001 (SI 2001/1004) — Class 1 employer NIC; rates set by FA 2025.

    Related: National Insurance Contributions (Secondary Class 1 Contributions) Act 2025 — rate + threshold changes; National Insurance Contributions Act 2014 — Employment Allowance regime; Finance Act 2014 + amendments — connected-companies rule for EA; National Insurance Contributions Act 2022 — Freeport + Investment Zone reliefs; Employment Allowance regulations — sole-director-only company exclusion (since April 2016)

    HMRC manual: National Insurance Manual (NIM02000+ thresholds; NIM06700+ Employment Allowance; NIM06900+ Veterans relief)

    Common mistakes + traps

    Worked example

    BetaCo Ltd, 5 employees: 1 director, 2 staff on £30k, 1 apprentice under 25 on £18k, 1 under-21 on £22k

    2025/26 full-year NIC calculation for BetaCo. Director on £12,570 (above £5,000 threshold). 2 × £30,000 standard staff. 1 × £18,000 apprentice (NI cat H). 1 × £22,000 under-21 (NI cat M). Employment Allowance available £10,500.

    1. Director: (£12,570 − £5,000) × 15% = £1,135.50 employer NI.
    2. 2 × standard staff £30k: 2 × (£30,000 − £5,000) × 15% = 2 × £3,750 = £7,500.
    3. Apprentice £18k (NI cat H): zero secondary NI (under UST £50,270) = £0.
    4. Under-21 £22k (NI cat M): zero secondary NI (under UST £50,270) = £0.
    5. Total gross employer Class 1 secondary NI: £1,135.50 + £7,500 = £8,635.50.
    6. Apply Employment Allowance £10,500 — covers entire liability; net employer NI = £0.
    7. Compare to 2024/25 equivalent (13.8% × £9,100 threshold): would have been ~£5,500 gross less EA £5,000 = ~£500 net. 2025/26 net = £0 despite higher rate, because EA more than doubled.

    Outcome: BetaCo pays zero employer NI 2025/26 due to apprentice + under-21 carve-outs + Employment Allowance fully absorbing the rest. Without EA, would have been £8,635.50 gross.

    How this connects to the rest of the framework

    RTI mechanics →

    Claim Employment Allowance via EPS — must be re-claimed each tax year.

    Apprenticeship Levy →

    Apprentice NI carve-out is separate from Apprenticeship Levy — both can apply concurrently.

    Class 1A NIC + mandatory payrolling →

    Class 1A rate also rose to 15% from April 2025 — matches secondary rate.

    /tax-reliefs-uk/employment-allowance →

    Detailed EA mechanics in reliefs hub — connected companies test, exclusions.

    Frequently asked questions

    What happens if I miss the Self Assessment deadline?+
    The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.
    Do I need an accountant or can I file Self Assessment myself?+
    Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.
    How do payments on account work?+
    When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.
    Did the Employment Allowance go up?+
    Yes — to £10,500 from 6 April 2025 (was £5,000) and the £100,000 NIC bill cap was removed so all eligible employers can claim.
    Why did employer NI on a £30k employee rise so much?+
    Rate +1.2pp AND threshold cut by £4,100. Combined: 15% × (£30,000 − £5,000) = £3,750 vs 13.8% × (£30,000 − £9,100) = £2,884 — about 30% more.
    Can a sole director Ltd claim Employment Allowance?+
    No — excluded since April 2016 if the only employee paid above the secondary threshold is the sole director. Adding a second paid employee can restore eligibility (subject to substance).
    Is Veterans relief permanent?+
    No — currently extended to April 2026. Verify current status before planning hires after that date.

    Free + regulated-body resources

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