Employers' National Insurance Contributions for 2025-26 | Atek Accounting

Key National Insurance Updates for 2025-26

As we approach the 2025-26 tax year, it’s essential for employers to stay informed about the latest changes to National Insurance (NI) contributions. These updates can significantly impact payroll processes and overall business finances. Here’s a detailed guide to help you navigate the new rates and thresholds.

What is National Insurance?

National Insurance is a tax system in the UK that funds various state benefits, including the State Pension, unemployment benefits, and the National Health Service (NHS). Both employees and employers contribute to NI, with the amount based on the employee’s earnings.

Key Changes for 2025-26

  1. Rates and Thresholds:
    • The Class 1 National Insurance thresholds have been updated. Employers will now pay NI on earnings above the secondary threshold of £5,000 per year [1].
    • The employer NI rate has increased from 13.8% to 15% [1].
  2. Class 1A and Class 1B Contributions:
    • These contributions apply to benefits in kind and PAYE Settlement Agreements (PSAs). The rates for these contributions have also been adjusted for the new tax year [1].
  3. Employment Allowance:
    • The Employment Allowance, which allows eligible employers to reduce their annual National Insurance liability, has been increased to £10,500 [1].
    • The restriction that previously prevented employers with a secondary Class 1 NICs liability of more than £100,000 in the prior tax year from claiming the allowance has been removed [1].

How to Calculate Employers’ National Insurance Contributions

To calculate the NI contributions, employers need to consider the following steps:

  1. Determine the Employee’s Earnings:
    • Calculate the gross earnings for the pay period.
  2. Apply the NI Thresholds:
    • Deduct the secondary threshold from the gross earnings to find the amount subject to NI.
  3. Calculate the NI Contribution:
    • Multiply the amount subject to NI by the employer NI rate (15%).

For example, if an employee earns £30,000 per year:

  • Earnings above the secondary threshold: £30,000 – £5,000 = £25,000
  • Employer NI contribution: £25,000 * 15% = £3,750

Benefits of Understanding National Insurance Contributions

Staying informed about NI contributions helps employers:

  • Ensure Compliance: Avoid penalties by adhering to the latest regulations.
  • Financial Planning: Accurately forecast payroll expenses.
  • Employee Relations: Transparently communicate deductions to employees.

Tips for Smooth Payroll Management

Navigating the complexities of National Insurance contributions can be challenging, but staying updated with the latest changes ensures smooth payroll operations. Employers should regularly review HMRC guidelines and consider using payroll software to automate calculations and stay compliant.

Feel free to reach out if you have any questions or need further assistance.

For more detailed information, you can refer to the official GOV.UK guidance on rates and thresholds for employers 2025-26.

More resources:

References:

[1] Changes to the Class 1 National Insurance Contributions Secondary …