Changes in Employers Allowance from April 6, 2025 – what do you need to know? part 2

In the previous article, we discussed changes for companies where the director is the sole employee. Today, we will look at other situations, including companies that employ more people.

Two directors drawing salary

If a company has two directors who receive a salary and each of them earns more than £6,504 per year, it means that the company is entitled to Employers Allowance. In practice, this means that if directors set their salary up to £12,570 per year, they will be exempt from both National Insurance contributions and income tax deductions.

Director and employees

If the company employs both a director and employees, and their annual salary amounts to £12,570, it will also not involve the necessity of paying employer’s National Insurance contributions.
However, it is worth remembering a few things:

• The minimum hourly wage – will increase to £12.21 from April 2025.
• Part-time employees (e.g., 20 hours per week) may exceed the tax-free threshold. For example, with an hourly rate of £12.21, the minimum monthly salary will be £1,058.20, and the annual salary will be £12,698. In such a case, the annual salary deduction could be around £50.
• Employers Allowance will increase from £5,000 to £10,500, which may reduce the cost of doing business with a larger number of employees.

If the company employs more people, it is worth consulting an accountant to determine the optimal salary levels and the point at which it will be necessary to start paying NI contributions.

Employer’s obligations regarding private pensions

Employers must also remember their duties regarding private pension contributions. If an employee earns more than £10,000 per year (some additional conditions attached) , they are entitled to join the company’s pension scheme. This means mandatory contributions of:

• 5% of the salary – deducted from the employee’s pay
• 3% of the salary – paid by the employer

It is a legal requirement – the employer must offer the employee a pension plan and cannot refuse if the employee decides to join.

We will discuss the details regarding private pensions in the next article.If you have any questions regarding changes in contributions and salaries, please contact me. I will be happy to help you find the best solution for your company.

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