Higher Employers NIC May Be Passed On To Employees And Consumers

24th December 2024

The National Insurance Contributions (Secondary Class 1 Contributions) Bill is a government bill that was introduced in the House of Commons on 13 November 2024. The bill completed all its House of Commons stages on 17 December 2024.

The purpose of the bill is to give effect to three changes to employer national insurance contributions (NICs) announced by the chancellor, Rachel Reeves, in the budget on 30 October 2024. Ms Reeves said the changes to employer NICs were necessary "to raise the revenues required to fund our public services and restore economic stability". The announcements on employer NICs were:

an increase in the rate of NICs paid by employers on their employees' earnings, from 13.8% to 15%.

a decrease in the secondary threshold (the threshold after which employers start paying NICs on their employees’ earnings) from £758 a month to £417.

an increase in the employment allowance from £5,000 to £10,500, and a removal of the £100,000 eligibility cap.

During its House of Commons stages, the bill was opposed by all opposition parties. It was also subject to several proposed amendments, none of which were approved. Those opposing the bill argued that the changes to employer NICs would represent an additional burden to employers, particularly small businesses. They also noted that the Office for Budget Responsibility judged that employers would pass a significant share of the cost of the changes onto employees and consumers through lower wages and higher prices.

The bill was introduced in the House of Lords on 18 December 2024 and is due to have its second reading and all other stages on 6 January 2025.