Identifying new nic increases on the payslip

From April 2024, employers and employees across the UK have had to navigate significant changes to National Insurance Contributions (NICs). These changes represent one of the biggest shifts to the tax and NI landscape in recent years, and many payroll managers are still getting to grips with what they mean in practice. If you’ve noticed unexpected movements on your payslips or your business payroll has shifted, you’re not alone. In this post, we’ll walk through the key NIC changes, explain what’s happened to the thresholds, and help you understand what you’re actually paying.

What Changed in April 2024?

The Government made a bold decision to reduce employee and employer National Insurance rates, but this came alongside a significant reduction in the thresholds at which NICs kick in. For the 2024/25 tax year, the employee NIC threshold dropped from £12,570 to £11,908 per annum. This might sound like a modest change, but it means employees start paying National Insurance contributions earlier in the tax year than before.

Similarly, the employer NIC threshold fell from £9,100 to £9,100 annually (this remained flat), but the real story is the employee-side change and the rate reductions that followed. The employee NIC rate decreased from 8% to 8% on earnings above the threshold (the main rate stayed the same, but the threshold shift effectively increased the tax burden for mid-range earners).

Understanding Your Payslip

When you look at your payslip in 2024/25, here’s what you should be seeing. Your gross salary is calculated as usual. Then, employee National Insurance is calculated on earnings above £11,908 per annum (or roughly £992 per month if paid monthly). Even if your annual salary sits between £11,908 and £12,570, you’ll now pay NICs—whereas last year you wouldn’t have.

For a monthly-paid employee earning £1,500 per month, for example, this means paying National Insurance on approximately £508 of that salary (£1,500 minus the monthly equivalent of the threshold). The calculation is straightforward, but the impact on take-home pay is real.

It’s worth checking your payslip against your understanding of the thresholds. If you’re earning between £11,908 and £12,570 annually and you’re not seeing a National Insurance deduction, it may be worth flagging this with your employer’s payroll team. Similarly, if you’ve recently received a payrise, ensure your NIC is being calculated correctly on the additional earnings.

What About Employer Contributions?

For businesses, the picture is slightly different. Employers pay National Insurance at 15% on earnings above the secondary threshold. From April 2024, the Government announced a temporary 2 percentage point reduction, bringing the effective rate down to 13% for qualifying businesses. However, this relief is time-limited and applies only until April 2025 at this stage.

This means employers should be seeing a reduction in their NIC bills—if calculations are being done correctly. For a business with multiple employees, this saving can be substantial, but it’s crucial that payroll software is updated to reflect these changes. We’ve seen instances where payroll systems haven’t been configured properly, leading to overcharges.

If you manage payroll, it’s sensible to conduct an audit of your National Insurance calculations for the current tax year. Check that your payroll provider has applied the threshold changes and, if you’re eligible, the employer relief. Getting this wrong can mean unexpected bills come year-end or overpayment of contributions.

Planning Ahead

These NIC changes have created some planning opportunities for both employees and employers. Self-employed individuals, for instance, may find that their National Insurance position has altered—though Class 2 and Class 4 contributions weren’t directly affected by the April 2024 changes. However, those considering changes to their employment status should factor in the broader NIC landscape.

For employers, the temporary relief on secondary NICs presents a window to review staffing costs and workforce planning. The relief is set to expire in April 2025, so decisions made now can help you prepare for that change.

Keep Track and Get Support

The National Insurance system is complex, and changes this significant can easily lead to confusion or miscalculation. Whether you’re an employee wanting to understand your payslip or an employer ensuring compliance, it pays to stay informed and seek support when needed.

For tailored advice, contact Severn Accounting — we’re here to help.