Employer NI Changes April 2025: The Full Impact for Solo Directors
The employer NI rate rose to 15% and threshold dropped to £5,000 in April 2025. Here's exactly what it costs directors and how to mitigate it.
What changed on 6 April 2025
The Autumn Budget 2024 announced two simultaneous changes to employer National Insurance, effective from 6 April 2025:
- The employer NI rate increased from 13.8% to 15%
- The Secondary Threshold (where employer NI begins) fell from £9,100 to £5,000
These changes were accompanied by a compensatory increase in the Employment Allowance from £5,000 to £10,500 — but only eligible companies can claim this, and sole director companies cannot.
The cost in real numbers
For a director paying themselves the £12,570 personal allowance salary:
| 2024-25 rules | 2025-26 / 2026-27 rules | |
|---|---|---|
| Secondary Threshold | £9,100 | £5,000 |
| NI rate | 13.8% | 15% |
| Taxable salary | £12,570 − £9,100 = £3,470 | £12,570 − £5,000 = £7,570 |
| Employer NI due | £3,470 × 13.8% = £478.86 | £7,570 × 15% = £1,135.50 |
| Increase | +£656.64 per year | |
Does this change the optimal salary?
For most solo directors, £12,570 remains optimal — even with the higher employer NI cost. Here's why: the entire salary cost (including employer NI) is deductible from company profit for corporation tax. At 19% CT, the tax saving on the additional employer NI is: £656.64 × 19% = £124.76. Net additional cost after CT saving: £531.88 per year.
This is a real cost, but it is modest compared to the income tax and NI savings from the salary+dividend strategy versus all-salary. The strategy remains correct — it just costs a little more.
What about a lower salary?
Some accountants now recommend a salary of exactly £5,000 to completely eliminate employer NI. The saving: no employer NI at all versus £1,135.50 at £12,570. But the trade-off: you also lose the corporation tax deduction on the additional £7,570 of salary (worth £7,570 × 19% = £1,438.30 at small profits rate). The CT deduction still outweighs the employer NI saving in most cases.
The crossover point depends on your corporation tax rate. Use the Salary vs Dividend calculator to model your specific situation.
The Employment Allowance offset — who qualifies?
Companies with at least one employee who is not a director can claim Employment Allowance up to £10,500, which fully offsets employer NI for most small companies. If you employ a spouse, admin assistant, or part-time bookkeeper, the company may qualify — and the salary strategy becomes even more efficient. Sole director companies (only the director as employee) remain excluded.
Related calculators
Frequently asked questions
Why can't sole director companies claim Employment Allowance?
Is the £5,000 Secondary Threshold permanent?
Disclaimer: This article is for general information only and does not constitute tax or legal advice. Tax rules change — verify with HMRC or a qualified accountant before making decisions. Published 6 April 2026 for 2026-27.