This is not a future change to prepare for. It’s live now, and for small businesses with a handful of employees, the numbers add up quickly. Here’s what you need to know, clearly and without jargon.

What Actually Changed — and When?

The headline change happened in April 2025, when the government raised the rate of employer National Insurance contributions from 13.8% to 15% and simultaneously cut the secondary threshold — the point at which employers start paying NI on a worker’s wages — from £9,100 a year down to £5,000.

For the 2026/27 tax year, which started on 6 April 2026, the employer NI rate remains at 15% and the secondary threshold stays at £5,000 annually. The thresholds are frozen until 2030/31, so there is no relief on the horizon from that direction.

What this means in practice is straightforward. For an employee earning £25,000, the employer now pays NI on £20,000 of that salary — resulting in a bill of £3,000 to HMRC, compared to significantly less under the old rules. Multiply that across three, five, or ten employees and the cumulative impact on your annual wage bill is considerable.t.

The Employment Allowance — Are You Claiming It?

The Employment Allowance remains at £10,500 for 2026/27, and the previous eligibility cap that prevented businesses with an employer NI liability over £100,000 from claiming it has been removed. This means that eligible businesses can offset up to £10,500 of their annual employer NI bill — which for many small employers will cover a meaningful portion of their total liability.

If you haven’t already claimed the Employment Allowance for 2026/27, this should be your first action.

What This Means for Directors Paying Themselves a Salary

For owner-managed businesses, the threshold change particularly rewards careful salary planning. Many small company directors choose a salary close to the secondary threshold to minimise employer NI, combining that with dividends to take money from the business in the most tax-efficient way.

The right salary level for directors in 2026/27 depends on whether the Employment Allowance is being claimed, what the company’s dividend position looks like, and whether there are other employees on the payroll. There is no single right answer — but there is almost certainly an optimal answer for your situation, and it is worth reviewing with your accountant.

A New Exemption Worth Knowing About

From April 2026, employer reimbursements for homeworking equipment, eye tests, and flu jabs are now exempt from both tax and National Insurance when processed through payroll. If you offer any of these to staff, processing them correctly through payroll rather than as expenses could save both you and your employees money. A small detail, but a genuinely useful one for businesses reviewing their benefits structure.

What’s Coming Next — Payroll Changes in 2027

It is also worth flagging a further change on the horizon. P11D forms are being phased out, and from April 2027 all benefits in kind — including company cars, private medical insurance, and other staff benefits — will need to be payrolled monthly, in line with the wider Making Tax Digital programme.

If your business provides benefits to employees, now is a sensible time to start reviewing your payroll setup and ensuring your software will be ready for that transition.

Your 2026/27 Payroll Checklist

• Employment Allowance claimed for 2026/27 via your payroll software EPS
• Payroll software updated with the correct 2026/27 NI rates and thresholds
• Director’s salary reviewed and optimised for the current thresholds
• Homeworking equipment, eye tests, and flu jabs processed through payroll (not expenses) where applicable
• Benefits in kind reviewed ahead of the April 2027 payrolling deadline
• Total employer NI cost budgeted accurately for the full tax year