Employer NI Changes April 2025: The Full Impact for Solo Directors

Bottom line: The April 2025 employer NI changes cost a typical solo director paying a £12,570 salary an extra £657 per year. The strategy of paying yourself the personal allowance as salary still works — but you should understand why, and what your company's true cost is now.

What changed — and when

On 6 April 2025, two things happened simultaneously to employer National Insurance contributions:

• The rate increased from 13.8% to 15%
• The Secondary Threshold dropped from £9,100 to £5,000

The Secondary Threshold is the point where employer NI kicks in. Previously, the first £9,100 of a director's salary was employer NI-free. Now only the first £5,000 is. Combined with the rate rise, this is a double hit.

To compensate, the Employment Allowance was raised from £5,000 to £10,500. This allows eligible companies to offset employer NI by up to £10,500 each year. However, sole director companies — where the director is the only employee — cannot claim it. That exclusion has been in place since 2016 and was not changed.

The real cost in pounds

£657 extra per year. That's roughly £55 a month. It's a real cost — but it's also partially offset by the fact that the whole salary cost (including employer NI) reduces your corporation tax bill.

Why the salary still makes sense

Here's the part that surprises many directors: the corporation tax saving on your total salary cost is substantial enough that the salary+dividend strategy still beats other approaches.

At a £12,570 salary:

• Total company cost: £12,570 + £1,136 employer NI = £13,706
• Corporation tax saved on that cost at 19%: £13,706 × 19% = £2,604
• Your take-home: £12,570 (zero personal income tax, zero employee NI)
• Net company outlay after CT saving: £13,706 − £2,604 = £11,102

You receive £12,570 in your pocket. The company's net cost after CT relief is £11,102. That's a better deal than it looks.

Golden nugget: salary vs. taking everything as dividends

Some directors think: "skip the salary entirely, avoid all the NI hassle, just take dividends." Run the numbers and it's almost always wrong. By taking no salary, you lose the CT deduction on £12,570 of income. At 19% CT, that's £2,388 of corporation tax you'd pay unnecessarily. You'd also lose a qualifying year towards your State Pension — potentially worth thousands in retirement income. The £1,136 employer NI is the price of a far larger saving.

What if you employ a spouse or assistant?

If your company has at least one employee who is not a director — even part-time — it may qualify for the Employment Allowance. At £10,500, this completely eliminates employer NI for companies with modest payrolls. A director who employs a spouse for genuine admin or bookkeeping work at even £8,000–£10,000 per year can qualify — changing the entire NI calculation. The employment must be genuine and the rate commercially reasonable.

Will the threshold change again?

The government has stated that the £5,000 Secondary Threshold will remain in place for this Parliament. The next review would come at a future Budget. For planning purposes, model on £5,000 remaining until at least April 2028. The employer NI rate increase is unlikely to be reversed.

Golden nugget: the NI is deductible, not just the salary

A common misunderstanding: some directors think only the salary itself is deductible, not the employer NI on top. Both are deductible from company profit for corporation tax purposes. HMRC treats employer NI as a staff cost — it reduces taxable profit the same as the salary payment. This is why the effective cost of employer NI is lower than the headline figure once you account for CT relief.

Action: model your specific position

The optimal salary depends on your corporation tax rate, your total income, and whether you qualify for Employment Allowance. Use the salary calculator to see your exact position — input your company profit, check whether you employ anyone else, and compare the net outcomes across different salary levels.