How changes in employment allocation will affect small businesses in 2025

National employer insurance rates will increase by 2025, which means that the cost of using staff will increase.

If you own a small business, you may wonder how this will affect your final result.

The good news is that there are also key changes in job allocation to help smaller companies such as their own to compensate for these costs.

This article explains how to take advantage of the employment allocation and compensate for the national insurance contributions of your employer.

So, if he is an employer, keep reading to understand how his cash flow will be affected in 2025.

This is what we cover:

Changes to the contributions of the National Employers Insurance (NIC)

As an employer, he pays the contributions of National Class 1 Secondary Insurance (NICS) on the profits of all employees above the secondary threshold, which in fiscal year 2024/25 is £ 9,100.

The United Kingdom government recently announced changes in the NIC of employers for fiscal year 2025/26 in the fall budget. These changes in payroll will increase income to finance public services such as NHS.

The budget confirmed that national employer insurance rates will rise from 13.8% to 15%, from April 2025.

The secondary threshold of the NICS employer will also be reduced from £ 9,100 to £ 5,000 per year, which means that more employers will be eligible to pay NIC.

These changes will increase the cost of using staff as a result. Therefore, to help minimize the impact on smaller companies, employment allocation will also increase: see more details below.

The United Kingdom government estimated that the result of budgetary changes will affect around 1.2 million employers.

Approximately 250,000 employers will see a decrease in the secondary responsibility of class 1 nics, 940,000 will see an increase and the costs of 820,000 employers can remain the same.

Key dates for national employer insurance changes

The previous payroll changes will enter into force as of April 6, 2025.

The secondary threshold of £ 5,000 a year will be in force from April 6, 2025 until April 5, 2028.

As of April 2028, the thresholds for national insurance will begin to increase with inflation.

What is the job assignment and how does it work?

The purpose of the employment allocation is to help eligible employers to reduce their annual responsibility for national class insurance 1.

Currently, you can only claim up to a maximum of £ 5,000 every fiscal year. But as of April 2025, the allocation increases to £ 10,500.

The autumn budget also announced the elimination of a significant restriction to the employment allocation.

Currently, employers who have incurred a secondary responsibility of NI Class 1 of more than £ 100,000 cannot claim the allocation. But this will be completely eliminated from April 6, 2025.

This opens the employment allocation to all eligible beneficial companies and organizations, regardless of how great their class 1 liabilities were in the fiscal year before the year of the claim.

According to the autumn budget, these changes will mean that 865,000 employers will not pay NIC in 2025.

However, it is not yet eligible to claim the allocation if your business is doing more than half of your work in the public sector, such as local advice and NHS services (unless it is a beneficial organization).

Nor can he claim if his company only has one director and that person is the only employee responsible for the class 1 secondary school.

How to claim employment allocation

You must claim the employment allocation every fiscal year (April 6 to April 5). You can claim it at any time during the year, but as soon as possible, you will get the assignment before.

You can make a claim for the assignment of employment as part of your paye’s presentation process, using either:

It must be easy to claim through your payroll software, but consult your software provider if you are not sure.

For some software solutions, for example, you only need to mark the box that indicates that you will claim the job allocation the next time you send a summary of employer’s payment (EPS) to HMRC.

If your payroll software does not have a job payment summary option, you can use HMRC basic Paye tools.

On the Basic Tools home page, select the correct name from the “Employer” menu.

Select “Change the employer’s details” and then select “Yes” in the field “Employment Assignment Indicator”.

Just answer “yes” to the question “do state aid rules apply?” Yeah Minimis state aid rules Apply to you. Otherwise, answer “no” and send to your EPS as normal.

Note: HMRC recently announced that state aid rules will no longer be applied as of April 2025, so all employment allocation claims should be specified “no” to the state aid question. The question will be eliminated in total from April 2026.

HMRC will not send you a formal letter for employment allocation, so you do not need to wait for confirmation. You can start using your job assignment as soon as you send your claim.

How changes in employment allocation could affect a small business

Here is an example of job allocation changes at work.

Suppose you direct a small business from the United Kingdom, Swings & Hammocks LTD, and use three full -time employees.

For fiscal year 2024/25, its class 1 secondary employer nic rate is 13.8% and its secondary threshold is £ 9,100 for each employee.

You calculate your class 1 secondary employer nic for the year, for a total of £ 8,653.

You can also claim the complete employment allocation of £ 5,000 and reduce your national insurance responsibility to £ 3,653.

The numbers of their staff and salaries remain the same during fiscal year 2025/26, but its class 1 secondary employer nic rate increases to 15% and its secondary threshold is reduced to £ 5,000.

You calculate the total of your class 1 total employer of £ 11,250 before the employment allocation. That is an increase of around 30% compared to the total of the previous year of £ 8,653.

You can also claim the new complete employment allocation of £ 10,500 and reduce your national insurance responsibility to £ 750.

Then, due to the employment allocation, he ends up paying less class 1 secondary employer nic for fiscal year 2025/26. The responsibility of its Employer NICS is actually reduced by £ 2,903.

Final thoughts

The increase in employment allocation aims to help smaller companies compensate for the highest costs because payroll changes enter into force in 2025.

And, as you can see in the previous example, changes can actually lead to the reduction of their annual employer responsibility.

So be sure to claim the job allocation every year as part of your Paye presentation process.

If you need help to configure your business payroll or are not sure whether it is eligible for job allocation, we recommend talking directly to a payroll accountant or expert.