As part of being a company doctor and profit consultants we are constantly advising clients and contacts of changes in tax that will affect them. The recent change in National Insurance will have a big effect on business and all the signs might move the UK into a recession. From 6 April 2025, the rate of Employers’ National Insurance (“NI”) will increase by 1.2% from 13.8% to 15%. Also, the point at which employers’ NI starts to become payable is being reduced from £9,100 per annum to just £5,000 per annum. This means that for someone earning £9,100 per annum there will be an additional NIers cost of £615 per annum (£9,100 less £5,000 at 15%) and for an average full-time salary of £35,000 the extra cost is £926 per annum. The actual cost increase is therefore much more than 1.2%. To cushion some of the damage, the Employment Allowance will be increasing. Eligible employers can offset the Employment Allowance against their NI bill, potentially reducing it to nil for very small employers. This allowance is increasing from £5,000 per annum to £10,500 from 6th April 2025. This increase will be a drop in the ocean for larger employers but it may help smaller businesses. The NI increase is a very significant additional cost to businesses. Some may be able to pass this extra cost on to customers via price increases but this will not be possible for all employers. Possible ways in which you could mitigate the cost increase are: 1. If finances allow, bonuses should be paid before April 2025 so that they are paid before the increase in NI comes into effect. This may not be possible for all employers, but for those that have the available cash it will offer a cost saving. 2. Salary sacrifice (optional remuneration arrangements) can save on employers’ NI if, in lieu of salary, the employee receives an alternative that is not subject to NI, such as pension contributions or free childcare. This will also reduce the NI bill for the employee. Conversely, some small employers may benefit from this change. A small employer who will have exhausted the current £5,000 Employment Allowance before 5th April 2025 may find their employers’ NI completely eliminated by the enhanced threshold of £10,500 in 2025/26. Small employers could delay bonuses until after 5th April 2025 and save employers NI where the 2024/25 bill would otherwise exceed the current £5,000 threshold. Businesses should crunch the numbers from April 2025 to calculate the overall effect of the NI changes. If you need help in assessing the impact on your business and the mitigation strategies available then our Profit Consultant and Company Doctor services can help.   Contact us today at [email protected].