Employing staff in the UK has become noticeably more expensive, and one change is responsible for most of it. Since April 2025, employer National Insurance starts at just £5,000 of each employee’s earnings, down from £9,100, and the rate has risen to 15%.
These figures remain unchanged for 2026/27, and the threshold is frozen until at least April 2028, so this is now a permanent feature of payroll planning.
In this guide, we break down what the £5,000 threshold really costs, who it hits hardest, and six practical ways to reduce the bill.
What Changed With Employer National Insurance
Three changes took effect together from April 2025 and still apply in 2026/27:
- The employer rate rose from 13.8% to 15%
- The secondary threshold fell from £9,100 to £5,000 per year (£417 per month, £96 per week)
- The Employment Allowance more than doubled from £5,000 to £10,500, with the £100,000 eligibility cap removed
| Item | Before April 2025 | 2026/27 |
| Employer NI rate | 13.8% | 15% |
| Secondary threshold | £9,100 | £5,000 |
| Employment Allowance | £5,000 | £10,500 |
The threshold cut is the part that stings. Lowering the starting point by £4,100 adds £615 of employer National Insurance per employee before the rate rise is even counted.
How Much More Are You Actually Paying
The quickest way to see the squeeze is to compare costs per employee:
| Salary | Old cost (13.8% above £9,100) | New cost (15% above £5,000) | Increase |
| £15,000 | £814 | £1,500 | £686 |
| £25,000 | £2,194 | £3,000 | £806 |
| £30,000 | £2,884 | £3,750 | £866 |
| £40,000 | £4,264 | £5,250 | £986 |
For a team of ten on average salaries, that is roughly £8,000 to £9,000 of extra annual cost with no change to what anyone takes home.
The pressure compounds with the minimum wage. The National Living Wage rose to £12.71 per hour from April 2026, so a full-time worker on the legal minimum earns over £24,000. The pay floor and the payroll tax are rising together.
Who Feels the £5,000 Threshold Most
The change applies to every employer, but the burden is not evenly spread. Businesses with large part-time or seasonal workforces are hit hardest, because many of their roles were previously below the old threshold and cost nothing in employer contributions.
Minimum wage sectors such as hospitality, retail, care and cleaning face a double bind, since wage floors rise every April and cannot be negotiated. Labour-intensive firms with thin margins, including construction and facilities businesses, feel it too, because staff costs dominate their profit and loss account. Owner-managed companies have their own problem, as the sole-director exclusion from the Employment Allowance changes the maths on how directors pay themselves.
If your business sits in more than one of these groups, a payroll cost review belongs at the top of your list.
Why Part-Time Staff Are Now Inside the Net
Under the old £9,100 threshold, many part-time roles cost nothing in employer National Insurance. The £5,000 threshold changed that overnight. A part-timer on £9,000 a year now costs £600 in employer contributions, up from zero, and a rota of fifteen part-time staff previously below the threshold can generate £8,000 to £10,000 of new annual cost.
The hiring arithmetic has shifted as well. Splitting one full-time role into two part-time roles used to reduce employer National Insurance; it now increases it, because the taxed band of earnings grows. Businesses built on flexible teams, such as cafes, shops, cleaning firms and childcare providers, should recost their rotas rather than assume the old assumptions still hold.
The £10,500 Employment Allowance Lifeline
The Employment Allowance is the main relief, and for many small employers it removes the pain entirely. For 2026/27 it is worth up to £10,500 per employer per year, set against your total employer National Insurance bill rather than calculated per employee. Since the £100,000 eligibility cap was removed, almost all businesses and charities can now claim it.
The effect for the smallest employers is dramatic. Four staff on £25,000 each create a £12,000 employer National Insurance liability, and the allowance removes £10,500 of it, leaving a true annual cost of just £1,500.
Two warnings apply. The allowance must be claimed through your payroll software and is not applied automatically, and a company whose only employee above the threshold is its sole director cannot claim it at all. Growing teams also outrun the £10,500 quickly.
Hidden Costs Many Employers Miss
The threshold cut reaches further than basic wages:
- Bonuses, overtime and commission attract the full 15% from the first pound, since most staff are already above £5,000
- Benefits in kind such as company cars and private medical insurance carry Class 1A contributions at the same 15% rate
- The extra cost lands monthly with your PAYE payment by the 22nd, so cash flow feels it every pay run
- Quotes and prices built on pre-2025 staff costs quietly erode your margin on every job
Six Ways to Reduce Your Employer NIC Bill
- Claim the Employment Allowance: Every year eligible businesses pay full contributions because the claim was never switched on in their software. Checking this is one of the first things we do in any payroll accounting review, because an unclaimed allowance is £10,500 left on the table.
- Use pension salary sacrifice: Employer National Insurance is not charged on employer pension contributions, so every pound of salary exchanged for pension saves the business 15% while leaving employees no worse off. A team of ten each sacrificing £2,000 a year cuts the employer’s bill by £3,000 annually, and employees save their own National Insurance on top.
- Check employee category letters: No employer National Insurance is due on earnings up to £50,270 for staff under 21 or apprentices under 25. Wrong category letters mean silent overpayment.
- Revisit director remuneration: A sole director with no other staff may avoid employer contributions with a £5,000 salary, while companies that can claim the allowance often still benefit from salary at the £12,570 personal allowance. Model it rather than guess.
- Recost every role before hiring: Build the full loaded cost into decisions, including 15% National Insurance, 3% pension and day-one Statutory Sick Pay, then feed it into your pricing. Many competitors have already passed these costs on.
- Time bonuses and reviews deliberately: Every extra pound of pay now carries 15% on top, so rewards structured through pensions or exempt benefits can deliver more value per pound spent.
Planning Your 2026/27 Payroll Budget
The sensible response is to build the new numbers into your planning rather than hope for a reversal. A simple quarterly routine keeps you in control:
- Recalculate the loaded cost of every role using the 15% rate and £5,000 threshold, not last year’s figures
- Check your Employment Allowance position each April and confirm the claim is active in your software
- Review salary sacrifice take-up, since every additional member joining the scheme cuts your bill further
- Stress test your prices against true staff costs before quoting on new work
- Keep an eye on Budget announcements each autumn, because thresholds and reliefs can move again
Employers who treat National Insurance as a managed cost rather than a fixed one consistently pay less of it.
How ABM Chartered Accountants Can Help
As an ACCA and ICAEW accredited firm based in Canary Wharf, ABM Chartered Accountants helps small businesses, landlords and contractors keep employment costs under control. We run fully managed payroll with RTI submissions and auto-enrolment, check your Employment Allowance claim and category letters, model director salary and dividend strategies, and design salary sacrifice schemes that cut your bill without cutting your team.
The £5,000 threshold is not going anywhere before 2028. Speak to ABM Chartered Accountants today and make sure your business pays no more employer National Insurance than it legally needs to.
Frequently Asked Questions
How much employer National Insurance do I pay per employee in 2026/27?
You pay 15% of each employee’s earnings above £5,000 a year. For someone on £30,000, that is £3,750 annually before any Employment Allowance is applied against your total bill.
Can every business claim the £10,500 Employment Allowance?
Most can, including those with large National Insurance bills, since the £100,000 cap was removed. The main exclusion is a company whose only employee above the threshold is its sole director.
Does the £5,000 threshold apply to part-time staff too?
Yes. The threshold applies per employee regardless of hours, so part-time workers earning above £5,000 a year now attract employer National Insurance even though many were cost-free under the old £9,100 threshold.