How the 2025 National Insurance Changes Could Affect Your Director’s Salary

From 6th April 2025, new National Insurance (NI) thresholds came into effect—and if you’re a company director taking a salary through your limited company, these changes may result in a higher employer’s NI bill than you’ve seen in previous years.

What’s Changed?

Due to the updated thresholds, many directors will now see an increase in the employer National Insurance contributions their company needs to pay on their salary. While the exact amount will vary depending on your specific salary level, the increase can be significant over the course of a year.

However, it’s worth noting that employer’s NI is a deductible expense for corporation tax purposes. That means if your company is profitable, the net cost to the business will be offset by a reduction in corporation tax—ranging between 19% and 25%, depending on your company’s marginal tax rate.

What About the Employer Allowance?

The Employer Allowance has increased for the 2025/26 tax year and now exempts eligible companies from paying the first £10,500 of employer’s NI (up from £5,000 in the previous year).

However, single-director companies without any other employees do not qualify for this allowance. This means that if you’re the only paid employee of your business, you won’t benefit from the increased allowance under the current rules.

Ways to Reduce Your Employer NI Bill

If you’re looking to manage or reduce your company’s employer NI liability, here are two common options:

1. Adjust Your Salary and Dividend Mix

Reducing the salary you draw from the company—and instead taking more of your income as dividends—can help lower your employer’s NI contributions. Dividends aren’t subject to employer’s NI, making this a potentially more tax-efficient strategy if your company has sufficient profits.

2. Hire an Additional Employee

Bringing on an employee who earns above the employer’s NI threshold of £417 per month could make your company eligible for the £10,500 Employer Allowance.

Important things to note if considering this option:

• The employee must be doing genuine, demonstrable work for the company
• They must be paid at least the National Minimum Wage (unless they are also a director)

Need Advice?

Every business is different, and what works best for one company may not suit another. If you’re unsure how these changes affect you or would like to discuss ways to reduce your employer NI bill, feel free to get in touch. We’d be happy to talk it through and help you make the most tax-efficient decisions for your business.