Chancellor Rachel Reeves announced the expected increase in employers’ National Insurance contributions, but thrown a possible lifeline to small businesses.
Employers will pay an additional 1.2 per cent to 15%, from April 2025. The secondary threshold – the level at which employers start paying national insurance on each employee’s salary – will also be reduced from £9100 per year to £5000. This will raise £25 billion per year by the end of the forecast period.
"I know that this is a difficult choice. I do not take this decision lightly," she said. She also unveiled an increase to the employment allowance for small businesses, which allows eligible employers to reduce their National Insurance liability.
She told the Commons: “I am today increasing the employment allowance from £5000 to £10,500. This means 865,000 employers won’t pay any National Insurance at all next year, and over one million will pay the same or less as they did previously.
“This will allow a small business to employ the equivalent of four full-time workers on the national living wage without paying any National Insurance on their wages.”
She accepted it was a "difficult decision".
“But any responsible Chancellor would need to take difficult decisions today," she said. "To raise the revenues required to fund our public services, and to restore economic stability.
“We are asking business to contribute more, and I know that there will be impacts of this measure felt beyond businesses, too as the OBR have set out today. But in the circumstances that I have inherited, it is the right choice to make."
