The UK budget for the 2025/2026 tax year – higher costs for employers | Articles

The approaching start of the new tax year is a good time to get familiar with the rates of tax liabilities and reliefs that will come into force as early as April. Although some, such as the tax-free Personal Allowance in the UK, will stay the same, the budget includes plenty of changes, and one of the groups that needs to prepare for them is employers, because the cost of employing staff is going up. How exactly will costs for employers change in the 2025/2026 tax year?

Summary & key takeaways

Employers' NI contributions rise from 13.8% to 15%, and the threshold drops from £9,100 to £5,000.
The Employment Allowance increases from £5,000 to £10,500 and covers more businesses.
From 1 April 2025 the minimum wage for those aged 21 and over is £12.21 an hour.
Statutory Sick Pay rises to £118.75 and statutory parental pay to £187.18 a week.

National Insurance Contributions (NICs)

The rate of NI contributions paid by employers, known as secondary Class 1 NICs, will rise from 13.8% in the 2024/25 tax year to 15%. The second significant change is the lowering of the threshold above which an employer must pay contributions on an employee’s income - it will be reduced from £9,100 a year to £5,000.

These changes translate directly into higher employment costs. Employers will not only pay higher contributions, but will also have to start paying them for lower-earning employees who were previously outside the scope of this obligation.

Changes to the Employment Allowance

A change has also been prepared that may somewhat offset the increased costs, particularly for smaller employers. This is the increase in the available Employment Allowance from £5,000 to £10,500 - the amount an employer can deduct over the tax year from their Class 1 National Insurance liability.

The threshold restricting the Employment Allowance to employers whose NI contribution liabilities in the previous tax year were £100,000 (or less) will also be removed. Without this limit, the allowance will be available to a larger number of businesses.

The minimum wage in the UK

New minimum wage rates will apply from 1 April. The national minimum wage in the UK in 2025 will be:

for those aged 21 and over: £12.21 (compared with £11.44 in 2024/25)
for those aged 18 to 20: £10.00 (compared with £8.60 in 2024/25)
for those under 18: £7.55 (compared with £6.40 in 2024/25)
for apprentices: £7.55 (compared with £6.40 in 2024/25)

Changes to statutory payments for employees

Statutory payment rates for employees will also rise in the 2025/26 tax year, including:

Statutory Adoption, Maternity, Paternity, Shared Parental and Parental Bereavement Pay: the standard rate will rise from £184.03 a week in the 2024/25 tax year to £187.18 in 2025/26.
Statutory Sick Pay: the standard rate will rise from £116.75 a week in the 2024/25 tax year to £118.75 in 2025/26.

Important! Alongside the payment rates, the earnings threshold for qualifying for them has also been raised, from average weekly earnings of £123.00 to £125.00.

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