As announced in the Autumn 2024 Budget, National Living Wage (NLW) and National Minimum Wage (NMW) will both be increasing with effect from 1 April 2025. The rates are:
| From 1 April 2025 | From 1 April 2024 | |
| National Living Wage (21 years and over) | £12.21 | £11.44 |
| NMW - 18-20 year olds | £10.00 | £8.60 |
| NMW - 16-17 year olds | £7.55 | £6.40 |
| Apprentice Rate | £7.55 | £6.40 |
For a person on the age 21 and above NLW working 37 hours per week, the increased gross salary costs in 25/26 will be £1,485 when compared with 24/25. If the employer is contributing to the employee's pension scheme, there will be a similar proportional rise in the employer pension costs.
National Insurance Contributions (NICs)
Employers pay secondary Class 1 NICs on all employees' earnings above the secondary threshold, which for 2025/26 is reducing from £9,100 to £,000 per year. This means that more employers will become eligible to pay NICs.
The employers' NI rates will also be raised from 13/8% to 15% from 6 April 2025.
Based on the NLW example above, the costs for the business would be £1,790 in 24/25 rising to £2,560 in 25/26. This means overall the annual cost to an employer of the employee detailed above would rise by £2,256 in April 2025 before consideration is given to any pension costs.
However, currently small qualifying businesses are eligible to claim a deduction of £5,000 against their NIC liability. This deduction will be increasing to £10,500 with effect from April 2025.
For more information on how the changes to NLW, NMW and Employers' NICs will affect your business, please contact us.
