Big changes are coming from April 2025, and if you run a small business or you’re the director of your own company, this will definitely affect you.
In this article, we’ll explain how to avoid paying more National Insurance (NIC) than you need to — and what actions you should take now.
Small business owners like café owners need to plan ahead for the 2025 National Insurance and wage changes to avoid paying more than necessary.
Minimum Wage Is Going Up – Are You Ready?
From 1st April 2025, the National Minimum Wage will increase. Here’s what you’ll have to pay at least:
- £12.21/hour if you’re 21 or over (currently £11.44)
- £10.00/hour for 18 to 20-year-olds (currently £8.60)
- £7.55/hour for under 18s and apprentices (currently £6.40)
Example:
If you employ a 21-year-old part-timer working 20 hours a week, you’ll need to pay them £244.20 a week instead of £228.80.
👉 Good news: If you’re an AWOC client, we’ll automatically update wages in your payroll from 6th April 2025 — unless you ask us to increase them more than the minimum.
Employer National Insurance Is Getting More Expensive
Sadly, it’s not just wages going up — Employer NIC (the tax you pay as an employer) is increasing too:
- The rate will rise from 13.8% to 15%.
- You’ll start paying NIC on salaries over £5,000 a year, instead of £9,100.
What does this mean?
You’ll pay NIC on smaller wages and at a higher rate.
What About the Employment Allowance? (Some Good News!)
If you’re a small business with employees (other than just yourself), you might get the Employment Allowance, which will increase from £5,000 to £10,500/year.
In plain English:
If you qualify, this can wipe out your Employer NIC bill on the first £10,500 of NIC — meaning you might not feel the rate increase at all!
⚠️ BUT — if you’re a sole director with no employees, you don’t qualify for this allowance. Keep reading, because this affects you the most.
Sole Directors: How Much More NIC Will You Pay?
Let’s say you’re running your own limited company, and you’re the only employee. Like many directors, you probably pay yourself a small salary to reduce tax.
Here’s how it looks today (2024/25):
- You take £1,048/month, and your company pays £40.02/month Employer NIC.
- You don’t pay Income Tax or Employee NIC on this salary.
From April 2025:
- On the same £1,048/month, your company will now pay £94.65/month Employer NIC — more than double!
Ouch, right?
How Can You Avoid Paying More?
If you don’t want to pay Employer NIC at all, you’ll need to lower your salary to £417/month.
Here’s a quick guide:
| Monthly Salary | What You Pay (Employer side) |
|---|---|
| £417 or less | £0 Employer NIC, £0 Employee NIC, £0 Tax |
| £418 to £1,048 | Employer NIC at 15% on amount over £417 |
| Above £1,048 | Employer NIC, Employee NIC, and Income Tax |
So What Should You Do?
- If you have employees on minimum wage — we’ll handle this automatically.
- If you’re a sole director, now is the time to decide what salary strategy makes sense for you:
- Stick to £1,048/month and pay more Employer NIC (but still save on Corporation Tax).
- Drop to £417/month and avoid NIC, but with less Corporation Tax saving.
Should You Stay on Payroll as a Director? (Short Answer: Yes!)
Even if NIC goes up, we recommend directors stay on payroll. Why?
- You’ll still qualify for State Pension and benefits.
- You’ll save Corporation Tax — usually £1,000+ per year, even if paying some NIC.
- You stay compliant — and that’s worth peace of mind.
Let’s Put It All Together – Example
John runs his own business and is the only director.
- Right now, he takes £1,048/month, pays £40.02/month NIC.
- From April 2025, if he keeps this salary, he’ll pay £94.65/month NIC.
- Alternative: He could lower his salary to £417/month and pay no NIC at all, but he’ll save less Corporation Tax.
👉 Best option? Depends on John’s business and needs — that’s where we can advise.
Final Thoughts – Don’t Overpay!
Plan ahead to avoid paying more National Insurance in 2025. There are smart ways to set salaries and use allowances — but you need to know your options.
If you want to know what’s best for you or your business, reach out to us. We’ll explain everything clearly and help you make the right choice.
📞 Contact AWOC Accountants — Monday to Friday, 9 am to 3 pm
Let’s keep your business tax-smart!
