National Insurance increases from April 2025

National Insurance increases from April 2025

From April 2025, employers can expect to pay 60% more in National Insurance in the 2025-26 tax year due to National Insurance Contributions (NIC) rises announced at the last Budget.

In 2024 an employer paid £1,617 for each full-time employee on minimum wage, this will increase to £2,583 from 1 April, reveals analysis by the Centre for Policy Studies (CPS) with one low wage employee now costing £24,806 per year.

The Centre for Policy Studies director, said: ‘Labour claims to understand the importance of growth and to have made it a priority.’

‘But it was clear from the moment of the Budget that taxing jobs and work would damage the economy. As this analysis shows, the changes to employer’s National Insurance and the increases in the minimum wage make it disproportionately more expensive to employ those at the lower end of the wage scale.’

For example:

A full-time worker on minimum wage in 2024 earned a salary of £20,821, paying £1,650 in income tax over the year.

From the next tax year, the same worker will earn £22,222, a rise of £1,401. However, the amount of income tax paid on this also increases by 17% from £1,650 to £1,930.

However, even though a minimum wage employee will be £1,401 better off per year, income tax will absorb £280 of this, £1,930 in total. This leaves a minimum wage employee with £20,292 after income tax, up from £ 19,171 in 2024.

On top of this, National Insurance contributions (NICs) will also increase for an employee, from £659 in 2024, to £771 in 2025, meaning the employee will pay £2,701 in total, earning £19,521 after income tax and NICs.

In 2024 it cost businesses £1,617 in NICs per full time employee on minimum wage, this flies up by over £900 after the NICs’ increase to £2,583.

This means that each week an employer will be forking out 60% more in NICs than the previous year, increasing from £31 per week, to £50 per week.

It is not only NICs and minimum wage rises businesses will be dreading, lowering the rate when employers begin to pay NICs to £5,000 is also set to cost £966 per employee.

CPS tax and fiscal researcher, said: ‘The more of an employee’s salary is owed in tax – whether paid by the employee or directly by the employer – the more costly it is for businesses to create and sustain jobs.’

‘Increasing taxes on employment harms businesses and workers alike. By making it more expensive to employ people, the hikes in employer’s National Insurance disproportionately affect the lowest paid or those who are looking to move back into work after being economically inactive.’