Secondary Threshold reduced to £5,000 and secondary Class 1 rate raised to 15% announced

Employer National Insurance contributions will be charged on a wider band of earnings and at a higher rate from the start of the 2025-26 tax year. The Secondary Threshold, the point at which employers begin paying secondary Class 1 contributions on an employee's earnings, has been reduced to £5,000 from 6 April 2025, and the secondary Class 1 rate has been increased to 15% for 2025-26¹.

The Social Security (Contributions) (Rates, Limits and Thresholds Amendments, National Insurance Funds Payments and Extension of Veteran's Relief) Regulations 2025 set the National Insurance rates, limits and thresholds for the tax year beginning 6 April 2025, covering Class 1, Class 2, Class 3 and Class 4 contributions¹. The instrument extends across the United Kingdom¹.

The regulations state that the Secondary Threshold "has been reduced to £5,000 from the 2025-26 tax year and will be frozen at this level up to the 2027-28 tax year, as announced at Autumn Budget 2024", and that the secondary Class 1 rate "has also been increased to 15% from the 2025-26 tax year in line with the Autumn Budget 2024 announcement"¹. The threshold had previously been frozen at £9,100 by the previous government up to 2027-28¹. Secondary Class 1 contributions are payable by employers on earnings above the Secondary Threshold at a single rate, 15% for 2025-26, with no upper limit on employers' contributions¹.

Other rates and thresholds for 2025-26 are also set out in the regulations. Employees pay primary Class 1 contributions at 8% on earnings between the Primary Threshold and the Upper Earnings Limit, and 2% above it¹. The Lower Earnings Limit rises from £123 to £125 a week from 6 April 2025¹. The Upper Earnings Limit remains at £967 a week¹.

For the self-employed, Class 4 contributions are payable at 6% on taxable profits between the Lower Profits Limit and the Upper Profits Limit, and at 2% on profits above the Upper Profits Limit¹. The Lower Profits Limit is fixed at £12,570 and the Upper Profits Limit remains at £50,270¹. The Class 2 weekly flat rate rises from £3.45 to £3.50, and the Small Profits Threshold rises from £6,725 to £6,845¹. Class 3 voluntary contributions rise from £17.45 to £17.75 a week from 6 April 2025¹.

The regulations also extend the zero-rate relief on secondary Class 1 contributions for employers of qualifying veterans until April 2026, having been scheduled to end in April 2025¹. The relief means employers pay no National Insurance for the first year of a veteran's employment up to salaries of £50,270¹. The government said the extension would "positively impact armed forces veterans who are transitioning into civilian life by incentivising the hiring of veterans and therefore increasing a veteran's chance of employment"¹.

Why it matters for households

The change affects the cost to employers of taking on staff from 6 April 2025. Because the Secondary Threshold falls from £9,100 to £5,000 and the rate rises to 15%, employers pay contributions on more of each employee's earnings and at a higher rate¹. The threshold is then frozen at £5,000 until 2027-28¹. Employees' own contributions are unchanged at 8% and 2%¹. The regulations do not set out how employers might respond to the higher cost, and no effect on pay or hiring has been reported in them.

Self-employed people see smaller changes: the Class 2 flat rate rises by 5p a week, the Small Profits Threshold rises by £120, and Class 4 rates stay at 6% and 2%¹. The Class 3 voluntary rate rises by 30p a week¹. The Lower Earnings Limit rises by £2 a week, which is the level at which employees start to build access to certain contributory benefits¹.

What happens next

The rates, limits and thresholds apply for the 2025-26 tax year only, beginning 6 April 2025¹. The regulations state that for future years, National Insurance rates, limits and thresholds "will continue to be set annually through the re-rating exercise as standard"¹. The veteran's relief extension runs until April 2026¹. The Secondary Threshold is frozen at £5,000 up to the 2027-28 tax year¹.