What You Need to Know About the Employer’s National Insurance Changes?

Author: Jon Baggot

Unless you have had your head in the sand, you’ve probably already heard about the substantial changes that came in this April — yes, we’re talking about Employer’s National Insurance. It’s not just the national minimum wage that is going up this year. Employer’s National Insurance is getting a shake-up too, and the effects could hit your bottom line harder than you think.

So, what’s changing?

The Rate Is Going Up

Let us start with the headline: employer’s National Insurance is increasing from 13.8% to 15%. That’s a 1.2% hike you’ll need to pay on top of your employees’ salaries. For a number of businesses, that alone is going to add pressure to already-tight budgets.

The Threshold Is Dropping

But it doesn’t stop there. The threshold, the point where you start paying National Insurance, is going down. It’s falling from £9,100 to £5,000. That means you’ll now be paying NI on a bigger part of your payroll than before.

So yes, you’ll be paying more on more.

Any Good News?

Yes. The government is increasing the employer allowance. It’s going up from £5,000 to £10,500. That means smaller employers may be able to offset some (or even all) of the other cost, but only if your wage bill isn’t too high.

What Does This Mean for You?

Here’s the key takeaway:

  • If your total payroll is around £100,000, you’ll probably break even compared to last year.
  • If your wages are over £100,000, you’re going to feel it.
  • If there are only directors on the payroll, you need to consider your salary options.

When you combine this with the jump in national minimum wage, the increase in payroll costs is significant.

What Do I Need to Do?

If you haven’t done so already, contact your accountant. At Numeric Accounting, we’re helping clients with the transition by reviewing payroll and more importantly updating their forecasts to ensure no nasty surprises later in the year.

You don’t want to get three months into the new tax year and wonder where your profits have gone.

Let’s have a chat.

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