Impact assessment

Employer National Insurance contributions (NICs) and Employment Allowance changes: Screening Equality Impact Assessment

Published 3 April 2025

Project objectives

This measure decreases the National Insurance contributions (NICs) Secondary Threshold, the earnings after which an employer becomes liable to pay Secondary Class 1 NICs on a given employment. The Secondary Threshold is currently set at £9,100 a year and will be reduced to £5,000 a year.

The Secondary Threshold of £5,000 a year will be in effect from 6 April 2025 until 5 April 2028. Thereafter the Secondary Threshold will be increased in line with Consumer Prices Index (CPI). This does not impact other employer NICs thresholds such as the Apprentice Upper Secondary Threshold or the Upper Secondary Threshold for employees under 21.

The employer Secondary Class 1 NICs rate has increased to 15% from 13.8%. The associated Class 1A and 1B NICs rates on expenses and benefits given to employees also increased to 15%. The new rate will be in effect from 6 April 2025.

From 6 April 2025, this measure also:

• increases the maximum Employment Allowance from £5,000 to £10,500
• removes the restriction that currently applies to the Employment Allowance where employers who have incurred a Secondary Class 1 NICs liability of more than £100,000 in the tax year immediately prior to the year of the claim are unable to claim it – this means all eligible businesses and charities will be able to claim a greater reduction on their Secondary Class 1 NICs liability, irrespective of what their Secondary Class 1 NICs liabilities were in the tax year prior to the year of the claim
• includes a consequential increase to the Small Employers Relief compensation rate from 3% to 8.5%

This impact assessment is in relation to the operational delivery of the changes. Further information on the policy can be found in the Tax Information and Impact Note (TIIN).

Customer groups affected

The customer groups that will be directly impacted by the change are:

• employers
• agents
• payroll software providers

What customers will need to do

What customers need to do as a result of the change

The Secondary Class 1, Class 1A and Class 1B NICs rate will increase in April 2025 from 13.8% to 15.0% and the Secondary Threshold will decrease from £9,100 to £5,000 per year. Employers will need to understand their PAYE reporting obligations to HMRC and then report employee pay information through the RTI Full Payment Submission (FPS) as they do now.

Employers new to PAYE will need to register and use payroll software. Employers are required to update their payroll software to ensure they pay the correct amount of Secondary Class 1 NICs from 6th April 2025.

Assessing the impact

The costing model used by HMRC to assess the Exchequer impact of changes to employer NICs is at the employer level. An employer is recognised as a person, company or organisation that hires people and pays them to do work. The model does not produce outputs for employees as they are not directly impacted.

This screening EQIA process assesses direct impacts to customers from the operational delivery of the change only. HMRC supports assessments of indirect impacts to inform Ministerial advice and publication of a Tax Information and Impact Note (TIIN).

Before the scheme started, we assessed the equality impacts on all the protected characteristic groups in line with the Equality Act and Public Sector Equality Duty and section 75 of the Northern Ireland Act.

HMRC has constructively engaged external stakeholder/customer groups to better understand how this change may affect customers who are employers. There is no evidence to suggest there are any specific impacts on customers who share the following protected characteristics:

• race
• sex
• gender reassignment
• sexual orientation
• religion or belief
• pregnancy and maternity
• marriage and civil partnership
• political opinion (in Northern Ireland only)
• people with dependants and those without (carers), which is not a protected characteristic but was also assessed

The following characteristic groups may be impacted:

Disability

Impact on customers

This measure does not introduce any change to the current reporting process. There is no evidence of direct impacts as a result of this change, on employers within this group.

Some employers may be unable to use digital channels due to a disability.

Proposed mitigation

For employers who are exempt from online payroll reporting due to being unable to use a digital channel, written guidance will be provided as well as extra support services as required. Customers can appoint someone else to deal with HMRC on their behalf, such as an agent.

Guidance published on GOV.UK complies with Government Digital Service (GDS) standards, accessibility standards and GOV.UK style guides.

Digital content can also be provided in a variety of formats upon request.

Age

Impact on customers

This measure does not introduce any change to the current reporting process. There is no evidence of direct impacts as a result of this change, on employers within this group.

Some employers may be unable to use digital channels due to their age.

Proposed mitigation

For employers who are exempt from online payroll reporting due to being unable to use a digital channel, written guidance will be provided as well as extra support services as required. Customers can appoint someone else to deal with HMRC on their behalf, such as an agent.

Guidance published on GOV.UK complies with GDS standards and GOV.UK style guides.

Digital content can also be provided in a variety of formats upon request.

People who use different languages (including Welsh language and British Sign language)

Impact on customers

This measure does not introduce any change to the current reporting process. There is no evidence of direct impacts as a result of this change, on employers within this group.

There may be employers whose first language is not English.

Proposed mitigation

HMRC offers a Welsh language service to customers, where proportionate, in line with HMRC protocol. Forms on GOV.UK can be requested in Welsh. HMRC constructively engages external stakeholder groups and representative bodies in the delivery of changes.

For any customers whose first language is not English, alternative arrangements can be made for friends and family to interpret or speak on a customer’s behalf. HMRC can access interpretation services.

British Sign Language services can be provided via the Extra Support Services available to customers.

Opportunities to promote equalities

We have considered opportunities to promote equalities and good relations between people in each of the protected characteristic groups and those outside of that group, none have been identified. HMRC will continue to constructively engage with customers to explore opportunities in the future.

A full Equality Impact Assessment is only required if potential major direct impacts are identified through the External Customer Screening Equality Impact Assessment. This measure does not introduce any change to the current reporting process.

A full Equality Impact Assessment is not recommended.