The April 2025 changes to Employer National Insurance Contributions (NICs) remain the most significant payroll cost increase for small businesses in recent years — and many local business owners in Harrow and Stanmore are still not fully optimised around them going into 2026/27.
If you employ staff, here is exactly where things stand and what you can do.
The Current Employer NI Position (2026/27)
Employer NIC rate: 15% (increased from 13.8%) Secondary threshold (where employer NI starts): £5,000 per year per employee (down from £9,100)
This combination means employers now pay 15% on a larger portion of every employee’s wages. For an employee earning £25,000, the employer NI bill increased by roughly £900 per year compared to two years ago. Multiply that across a team of five or ten staff and the impact is substantial.
The Employment Allowance – Are You Claiming It?
The Employment Allowance offsets the first £10,500 of your employer NI liability each year. This was increased from £5,000 as part of the same package of changes.
Who can claim it:
- Businesses with more than one employee (or at least one employee who is not the sole director)
- Your total employer NIC bill must have been under £100,000 in the previous tax year
Important: The Employment Allowance does not apply automatically. You must claim it through your payroll software or ask your accountant to do so. Many small businesses in Harrow are still not claiming it, leaving thousands of pounds on the table.
Salary vs Dividends for Directors in 2026/27
The employer NI changes have directly affected the optimal salary level for limited company directors.
Under the old rules, taking a salary at or around the personal allowance (£12,570) was often most tax-efficient. With the secondary threshold now at £5,000, the calculation has shifted. For many single-director companies not eligible for the Employment Allowance, the optimal director salary is now closer to £5,000 per year, with the remainder taken as dividends.
For companies that can claim the Employment Allowance, a higher salary (up to £12,570 or even higher) often remains more efficient.
This is genuinely complex and depends on your individual circumstances. If you haven’t reviewed your salary/dividend structure since April 2025, it is worth doing so now.
Practical Steps for Small Employers
- Confirm you are claiming the Employment Allowance if eligible
- Review whether your current salary/dividend split is still optimal for 2026/27
- Audit whether all staff benefits are being reported correctly through payroll (HMRC has increased scrutiny of benefits in kind)
- Check that PAYE and NIC payments to HMRC are being made on time, penalties for late payment have increased
I handle payroll for small businesses across Harrow, Stanmore, and Wembley, monthly payroll runs, PAYE submissions, Employment Allowance claims, and year-end P60s. Fixed fee, no surprises.
📧 info@yourtaxhelp.co.uk | 📞 07478 645331
Your Tax Help Accountants — Stanmore, London