April NIC Increases: Effects on Directors’ Salaries

Are you aware of how the April NIC increases will effect Directors’ salaries?

From 6^th April 2025, increases in Class 1 Employer’s National Insurance will come into effect, with the following changes:

• • Employer’s NIC rate increasing from 13.8% to 15%.
  • The secondary threshold, above which employer’s NIC are due, reducing from £9,100 to £5,000.
  • There will be a reduction in NIC through the Employment Allowance increasing from £5,000 to £10,500.

Previously, it has been tax efficient to draw salaries at the secondary threshold of £9,100 for one director companies who have been unable to claim the Employers Allowance, however with the change to the thresholds and recent changes to Corporation Tax rates, it is now more difficult to ascertain the optimal salaries to draw from a limited company. There are now multiple options, which are dependent on the circumstances of both the individual and business as a whole.

Single Director Companies

Single director companies can not take advantage of the increase in Employment Allowance, therefore will now start incurring Employer’s NIC from a salary of £5,000. In order to gain a qualifying year of State Pension, a minimum salary at the Lower Earnings Limit of £6,396 is needed.

Companies With Multiple Directors

Companies with multiple directors and/or employees will benefit from an increase in the Employment Allowance, with Employer’s NIC only being payable after the allowance of £10,500 has been exhausted. This means that where the company isn’t a single director company or where the Employers Allowance isn’t being claimed by an associated company, directors will be able to draw more from the business as salary without incurring any employer’s NI.

Corporation Tax

Corporation Tax should also be taken into consideration. Companies with profits in excess of £50,000 will be paying Corporation Tax at the marginal rate of tax (26.5%). With salaries and employer’s NIC both being allowable expenses for Corporation Tax purposes, higher salaries will have more of an effect on reducing your Corporation Tax liability at higher profit levels.

Get In Touch

For tailored business advice regarding the April NIC increases, please contact your local Whitings office today.

Disclaimer - All information in this post was correct at time of writing.