Every tax year, the government introduces changes, some beneficial to businesses and others quite costs. The 2025/26 tax year is no different. The upcoming 2025/26 tax year included an increases to employer's national insurance contributions (NIC) and national minimum wage.

Announced in the 2024 autumn budget, effective from 6 April 2025 the rate of employer NIC will increase by 1.2% to 15%. If that was not enough, the threshold at which employers are due to start paying contributions will decrease from £9,100 to £5,000 per year - placing adverse pressure on businesses overall payroll costs. Good news, the increase of the employment allowance from £5,000 to £10,500 per year may help offset the increase in employer’s NIC – the first £10,500 will not need to be paid to HMRC.

These changes could mean higher payroll costs for employers across the board, especially for those with large teams. Balancing these expenses amid inflation and rising living costs presents a challenge. However, we have developed the below calculator to help you forecast an employee's potential cost per month based on the new NIC rate.

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Want to forecast multiple employees? Download our Excel spreadsheet, perfect for small businesses with up to 50 employees, to help you analyse and compare the new workforce costs, including employer's NIC and pension contributions.

Navigating payroll adjustments during tough economic periods isn't easy, but being informed and proactive can make a big difference. Get in touch today to discuss your payroll needs.