How Are Small Businesses Protected from NI Increases?

Do Small Businesses Have to Pay Employers’ National Insurance?

Yes—if you employ staff earning above the threshold, you’ll need to pay employers’ NICs. This applies whether you have one worker or a whole team.

However, there are a few ways smaller businesses can lower these costs:

• Claim Employment Allowance – up to £10.500 you can claim as a small business.

   

• Hire staff under NI exemptions, such as apprentices under 25, workers under 21, or armed forces veterans

   

• Use careful payroll planning to keep wages around the NI thresholds (within legal limits)

   

Some company directors also choose to take a lower salary and the rest of their income through dividends, which don’t attract NI.

How to Keep Your NI Costs Down

Employer NI is relevant to payroll processing. Therefore, the scope of tax planning is very small. However, there might be few options small business owners can utilise to same more on their employer NI. 

(Disclaimer: the following information is not tax advice, and it is written for blogging purposes only. Tax Care Accountant does not take any responsibility for any potential losses for any potential misinformation.) 

Here are a few things small business owners can do to manage NI increases:

1. Use the Employment Allowance – If you’re eligible, this can save you up to £10,500 each year. Employer allowance is claim basis. It means if you do not claim it, you will lose it. Please ensure you ask your accountant to claim the employer allowance if you are eligible. However, if you run a one-person company without any employees, you are not eligible for employer NI. 
2. Hire self-employed staffs: This option will allow you to save 100% of your employer’s NI. Hiring a contractor is a very complicated option because it is subject to IR35 assessment. A recent update to IR35 legislation, you may not be able to hire a contractor for certain jobs. We would recommend speaking to an IR35 expert accountant to get an understanding of more about your options. 
3. Keep an eye on salary levels – If the threshold drops, consider adjusting pay levels (within the rules) to avoid unnecessary NI.

    

4. Salary sacrifice schemes – These allow employees to swap part of their salary for things like pensions or bikes, lowering NI bills for both sides.

    

5. Hire staff with NI exemptions – For example, under-21s or veterans may qualify for reduced or zero employer NI. You can also hire apprentices, which enables you to claim tax-free employer NI. 
6. Outsourcing: Outsourcing is a good option if you wish to save on your employer’s NI. However, outsourcing could be a risky option for some businesses. It is not possible to outsource staff for a certain industry. 
7. Split the business: if you run a business between two directors or partners. You can split the business and claim £21,000 employer NI allowance as opposed to £10,500. Splitting your business may risk your business growth or it might cause a long-term problem for your business. We would recommend speaking to a business advisor to get professional business advice.

    

8. Work with an accountant – Contact local accountants, they can help you spot savings and stay on top of any rule changes affecting your business.

    

Speak to a Small Business Accountant

If all this feels like a lot to deal with, you’re not alone. Many small business owners are unsure how these NI changes will affect them. That’s where we come in.

At Taxcare Accountant, we help small businesses handle their payroll, claim the right tax reliefs, and avoid unexpected costs. With April 2025 around the corner and new NI rules on the way, now is a great time to get professional advice.

Click here: See how we support small businesses