What is employer national insurance?

Employer National Insurance is a tax businesses pay on their employees' earnings, on top of wages. From April 2025 the rate rose to 15% on earnings above £5,000 a year per worker. Many employers can claim an Employment Allowance of £10,500 to reduce their bill. It does not appear on payslips.

Employers pay secondary Class 1 contributions on each worker's pay above the secondary threshold. In the October 2024 Budget the rate rose from 13.8% to 15% and the threshold fell from £9,100 to £5,000, from April 2025. To protect the smallest firms, the Employment Allowance rose from £5,000 to £10,500 and was opened to more employers. Charities and the public sector were not exempt from the rise.

There are reliefs. Employers pay no contributions on most earnings of workers under 21 or apprentices under 25, up to the upper earnings limit. The rise was expected to raise about £25 billion a year, making it one of the biggest tax increases in decades. From April 2029, National Insurance relief on salary sacrifice pension contributions will be limited to £2,000 a year.

Economists widely agree that much of the cost of employer National Insurance falls on workers through lower pay rises over time. Some is passed to customers through higher prices, or absorbed through lower profits and fewer jobs. Retailers and hospitality firms warned that the 2025 rise, combined with a higher minimum wage, would hit entry-level jobs. Smaller employers felt it most, despite the bigger Employment Allowance.

Who it affects: Every employer, ultimately workers via pay