Tax news · June 2026
Employer National Insurance went up and its threshold came down, while the Employment Allowance rose to 10,500 pounds. Here is the net effect for your business.
If you employ people, your National Insurance bill changed significantly from April 2025. The rate employers pay went up, the point at which they start paying it came down, and at the same time the allowance that shields smaller employers from the charge was more than doubled. The result is a mixed picture, where the smallest employers are often protected but larger payrolls cost noticeably more.
Two changes pull in opposite directions. The employer, or secondary, Class 1 National Insurance rate rose from 13.8 per cent to 15 per cent, and the threshold at which employers start paying it fell sharply from around 9,100 pounds to 5,000 pounds per employee. On its own that is a meaningful increase in the cost of employing people. Pulling the other way, the Employment Allowance, which reduces an eligible employer's National Insurance bill, rose from 5,000 pounds to 10,500 pounds, and the previous rule that excluded larger employers with bills over 100,000 pounds was removed, so more businesses can now claim it.
Every employer is affected, but the impact depends on size. A very small business with one or two staff may find that the larger Employment Allowance wipes out its employer National Insurance entirely, leaving it better off. A medium or larger employer, whose National Insurance bill is well above the allowance, feels the higher rate and lower threshold across its whole payroll and pays more overall. Sole director companies with no other employees usually cannot claim the Employment Allowance, so they tend to feel the increase without the relief.
The first step is to make sure you are claiming the Employment Allowance if you are eligible, because it is worth up to 10,500 pounds a year and is easy to miss. Beyond that, it is worth reviewing the cost of your payroll, looking at whether salary sacrifice arrangements for pensions can reduce the National Insurance on both sides, and factoring the higher employer cost into your pricing and your pay reviews. For owner managed companies, the change also feeds into the salary and dividend decision, which is worth revisiting each year.
Our honest view is that this was a real tax rise on employment, and businesses that took on staff have felt it. The larger Employment Allowance genuinely helps the smallest employers, and some are better off, but for anyone with a sizeable payroll the higher rate and lower threshold bite. We think the practical response is not to panic but to make sure every relief is claimed, to use salary sacrifice where it fits, and to build the real cost of employing people into your numbers, because pretending it has not changed only stores up trouble.
We make sure you claim the Employment Allowance and any other relief you are entitled to, set up tax efficient salary sacrifice where it helps, and review your payroll costs and director pay. Book a free call back and we will look at your figures.
It rose to 10,500 pounds a year from April 2025, and the old rule excluding employers with National Insurance bills over 100,000 pounds was removed, so more businesses can claim it.
The employer rate rose from 13.8 to 15 per cent and the threshold fell from about 9,100 pounds to 5,000 pounds per employee from April 2025, which increases the cost across your payroll.
We will make sure you claim every relief and keep your employment costs efficient. Book a free call back and we will review your payroll.