Big news for business owners—employing staff is about to get pricier. From April 2025, employers’ National Insurance (NI) contributions are going up, which means higher payroll costs for many businesses. But don’t panic just yet! There’s some good news, too—the Employment Allowance is increasing, and that could help offset some of the extra costs. Let’s break it down so you know exactly what’s changing and how to keep your NI bill under control. What’s changing with employer NI? Right now, businesses pay employer NI on employees’ earnings over £9,100 per year. But from 6 April 2025, two major changes kick in: The employer NI rate jumps from 13.8% to 15%. The NI threshold drops from £9,100 to £5,000, so you’ll start paying NI on lower earnings. What does this mean for your business? More of your payroll budget will be eaten up by NI costs. The government predicts: 250,000 businesses will see their NI bill go down. 940,000 will see an increase. 820,000 won’t see much change. On top of that, minimum wage rates are increasing from 6 April 2025, which means even higher payroll costs for many employers. If you have staff on minimum wage, you’ll need to factor in these rises when planning your payroll budget. What is the employment allowance and how can it help? The Employment Allowance is designed to reduce the amount of employer NI you pay. Right now, eligible businesses can claim up to £5,000 per tax year, but from April 2025, this will increase to £10,500. Even better, the restriction that stopped businesses with employer NI bills over £100,000 from claiming will be scrapped. That means more businesses can now benefit. With these changes, 865,000 businesses are expected to pay no employer NI at all in 2025. How do you claim the allowance? Good news—it’s pretty simple. You need to apply for the Employment Allowance each tax year (6th April to 5th April). The sooner you claim, the sooner you’ll see the savings. You can claim via: Your payroll software, or HMRC’s Basic PAYE Tools. Most payroll software lets you tick a box to claim the allowance when submitting an Employer Payment Summary (EPS) to HMRC. If yours doesn’t, you can do it manually using HMRC’s free PAYE tools. Once you’ve submitted your claim, there’s no waiting around for confirmation—you can start applying the allowance straight away. How this could affect a small business Let’s say you run ABC Services Ltd and employ three full-time staff. Here’s what these changes might look like for you: In 2024/25: You calculate your employer NI at 13.8% on salaries over £9,100, coming to £9,895. You claim the £5,000 Employment Allowance, so you end up paying £4,895. In 2025/26: Your employer NI is now 15%, and you start paying NI on salaries over £5,000—this brings your total bill to £12,600. With the new £10,500 Employment Allowance, your final bill is just £2,100, meaning you actually save £2,795 compared to what you paid before the changes. Even with the NI increase, some businesses will actually pay less thanks to the boosted Employment Allowance, but it’s important to consider all payroll changes—including wage increases—when budgeting for the year ahead. How can businesses tackle the National Insurance hike? The recent rise in National Insurance contributions means businesses will need to rethink their approach to budgeting and staffing. Here are a few smart ways to stay ahead of the game: Re-evaluate payroll plans: It’s time to take another look at those payroll figures! With the NI rates going up and the threshold dropping, businesses should plan ahead to absorb the financial impact. Updating your payroll budgets now can help avoid any surprises later on. Streamline workforce structure: A little shake-up could go a long way. Consider tweaking team roles, or even introducing more flexible working arrangements, to help keep costs under control. By fine-tuning your workforce and boosting productivity, you might be able to balance out some of the extra NI charges. Explore salary exchange options: Looking for a creative solution? Salary sacrifice schemes allow employees to swap part of their pay for perks, like extra holiday or a pension contribution, which can reduce NI costs for both sides. It’s a win-win! How Henry R Davis & Co. can help We know that tax changes can feel overwhelming, but that’s where we come in. At Henry R Davis & Co., we help businesses like yours stay on top of payroll changes, making sure you’re getting every relief and allowance you’re entitled to. With employer NI increases and minimum wage rises happening at the same time, it’s more important than ever to plan ahead. Whether it’s setting up payroll, claiming the Employment Allowance, or adjusting for wage increases, our team is here to support you. Need help making sense of it all? Get in touch with us today, and we’ll make sure you’re ready for April 2025 without any nasty surprises!
A Guide to employee expenses: What can you claim?
As an employee, you might find that you incur certain expenses while doing your job. The good news is that you may be entitled to claim tax relief on some of these costs, helping to ease the financial burden. But what exactly can you claim, and how does it all work? Let’s break down the rules to make it clearer. Understanding employee expenses When you spend your own money on costs related to your job, you might be eligible for tax relief. However, the expenses must be “wholly, exclusively, and necessarily” incurred in the performance of your duties. In other words, you can’t claim for anything that’s personal or optional. What expenses can you claim? Here’s a list of the most common expenses that employees can claim: Travel expenses If you travel for work (excluding your normal commute), you can claim back costs such as public transport fares, or mileage if you use your own vehicle. Keep in mind, travel between your home and your regular place of work is not eligible – it’s only for journeys that are part of your job. Subsistence costs (meals and accommodation) If you’re required to work away, you can claim expenses for accommodation, meals, and even things like a cup of coffee or snacks while travelling. These claims must be reasonable and should reflect what you’ve actually spent, so no splurging on luxury hotels! Professional fees and subscriptions If you’re a member of a professional body relevant to your job, you can claim tax relief on the membership fees, provided it’s an approved body by HMRC. This includes unions and other professional organisations. Keep in mind, it only applies if your membership is necessary for your role or helps you perform your duties. Uniforms and work clothing You can claim for the cost of repairing, replacing, or cleaning a uniform or specialised work clothing. This includes protective clothing (like safety boots or helmets) that you need to wear for your job. Note that everyday clothing, even if you only wear it for work, doesn’t qualify – it must be something you wouldn’t wear outside of work. Working from home expenses If you’re required to work from home, you can claim a proportion of the costs related to utilities, internet, and phone usage. HMRC offers a flat rate of £6 per week, or you can claim a higher amount if you have records to prove the actual costs incurred. Tools and equipment If you need to buy, repair, or replace tools or equipment specifically for your job, you can claim back the costs. However, this doesn’t include items that are also used for personal reasons. Business phone calls While you can’t claim the line rental or cost of your phone, you can claim back the cost of any work-related calls made from your personal phone. How to claim employee expenses There are a few ways to claim expenses, depending on your situation: Via Your employer: In many cases, your employer will reimburse you directly. If they do, you won’t need to worry about claiming tax relief separately. Through HMRC: If your employer doesn’t reimburse you, you can claim tax relief directly from HMRC. You can do this online through the HMRC website, or by filling in a form P87 if the amount is less than £2,500 a year. If it’s more than this, you’ll need to include the expenses on your Self Assessment tax return. Important things to remember Keep records: Always keep receipts and records of your expenses, as HMRC may ask to see proof of your claims. Claim within the time limit: You can claim expenses going back up to 4 years, but don’t leave it too long, or you might miss out! What can’t you claim? It’s just as important to know what you can’t claim. Here are some examples: Commuting costs between home and your regular place of work Everyday clothing, even if you wear it only for work Expenses that have already been reimbursed by your employer Final thoughts Claiming employee expenses can make a real difference to your finances, but it’s essential to understand what you’re entitled to and how to go about it correctly. If you’re ever unsure, consider reaching out to a tax professional who can help guide you through the process and ensure you’re claiming everything you’re entitled to.