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national insurance 2025
The new Labour Budget changes National Insurance, which could affect how much tax your company pays. Future budgets could alter this article. 

What's Changing? 

Two big things are in the pipeline for 2025: 
 
The tax companies pay for their staff is going up from 13.8% to 15% 
Companies will start paying this tax once staff earn £5,000 instead of the current £9,100 

Running Your Own Company? 

If you're the only director of your limited company, this gets personal. The government offers the Employment Allowance, a tax break worth £10,500.  
 
However, sole directors can't claim this allowance against their National Insurance contributions. This means you must consider how much to pay yourself next year, considering the changes in National Insurance. 
 
Sadly, sole directors can't claim it. This means you must consider how much to pay yourself next year. 

Money Talk 

Let's break this down into real money. Right now, if you're paying yourself £9,100 a year, you don't pay any National Insurance, and you're building up your state pension. 
 
From 2025, things look different. Take a £6,000 salary, and you'll pay about £150 in extra tax, though you'll save money elsewhere. The catch? You won't build up your state pension for that year. 
 
Looking ahead, you've got three choices about your salary: 
 
Pay yourself £12,570 - costs more but builds your pension 
Pay yourself less - saves money but affects your pension 
Skip the salary - saves hassle, but no pension for that year 

What About Bigger Businesses? 

If you're running a small business with five employees on £25,000 each, you're looking at about £1,500 extra in National Insurance each year. For a medium-sized business with 20 staff at the same salary, that jumps to around £6,000.  
 
This cost increase could affect your budgeting and financial planning, so it's important to consider these changes concerning your business size and structure. 

Covering the Extra Cost 

Let's say you run a shop or café. If these extra costs amount to £1,500 a year, you might need to increase prices by about 30p on every £100 sales to cover them.  
 
You might also consider other options, such as changing your opening hours or adjusting your stock levels.  
 
Additionally, you could explore cost-saving measures or ways to increase revenue to offset the extra cost. 

What's Best for You? 

It depends on what matters most to you: 
 
Are you thinking about retirement? 
Do you need the money now? 
How's your business doing? 
 
These are the questions to ask yourself when deciding. 

Getting Ready 

Now's the time to examine your numbers. Check what you're paying yourself, what you need to live on, and how much your business is making. 
Increase your prices or find other ways to cover the extra cost. The sooner you start planning, the easier it will be to adapt. Being proactive and planning for these changes now will ensure you're prepared when they occur. 

Need Some Help? 

The team at Hammond-Barr Accountants can discuss your situation and determine exactly what these changes mean for you. 
 
We'll also keep an eye on any new announcements—if anything changes, you'll be the first to know. Remember, seeking professional advice can give you the confidence to navigate these changes. 
 
Remember—there's still time to plan for these changes, and we're here to help. 

Want to know more? 

You can contact Hammond-Barr accountants on 01438 281281 or via email at [email protected]
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