Understanding National Insurance Changes for 2024–25
Discover the key National Insurance changes for 2024–25 and how they affect company directors and small businesses. Get expert advice from a trusted Hackney Accountant. With the advent of the new tax year, the widely used method of extracting profits from a company using a basic salary topped up by dividends has been revised. These changes may seem subtle at first glance but can have a meaningful impact on limited company directors and small business owners. If you’re navigating these updates, your local Hackney Accountant can help ensure your approach remains tax-efficient.
What Has Changed?
The government has introduced two important updates to National Insurance (NI) thresholds for 2024–25:
- The Secondary Threshold has been reduced from £758 per month to £417 per month. This is the point at which employers must start paying NI contributions on employees’ salaries.
- The Lower Earnings Limit has increased from £533 to £542 per month. This threshold determines whether an individual earns enough to receive NI credits toward their state pension.
Last year, directors could draw a monthly salary of up to £758 without paying any National Insurance while still earning credits toward their pension — a popular strategy for many small business owners.
This year, however, to secure NI credits, a director must now take a minimum salary of £542. Since this is above the new secondary threshold of £417, employers will now be liable for NI contributions of 15% on the difference — an additional cost of approximately £18.75 per month.
National Insurance Changes for 2024–2025- What This Means for Directors
While £18.75 per month may not seem like a deal-breaker, over the course of a year it totals £225. For a small business, this could influence decisions around payroll structures and profit extraction strategies. Directors must now weigh the benefits of receiving NI credits against the added employer costs — especially when planning dividend distributions or assessing tax liabilities.
It may also prompt some business owners to consider whether maintaining a minimal salary is still the most efficient route or whether alternative structures — such as increasing pension contributions or exploring employee benefit schemes — might offer better long-term advantages.
Seek Tailored Advice to Stay Ahead
Given these subtle yet impactful changes, it’s important not to take a one-size-fits-all approach. What works for one business may not work for another, especially when dealing with personal tax thresholds, family income splitting, and dividend planning.
If you’re unsure how these NI updates affect your financial planning, don’t leave it to chance. A qualified Accountant in Hackney can help you assess your options and stay fully compliant while maximising your take-home income. The right strategy now can save you hundreds — if not thousands — over the year ahead.