A single misunderstanding of employer thresholds in 2025–26 could cost a UK business thousands in unexpected PAYE and National Insurance liabilities or trigger avoidable HMRC penalties.
Every tax year, I see well-run businesses caught out not because they’ve done anything reckless, but because they’ve misunderstood how thresholds work. As payroll costs rise and margins tighten, knowing exactly when employer charges start, how much applies, and why it matters is no longer optional.
This guide is written for UK employers not tax technicians and explains the rates and thresholds for employers for the 2025–2026 tax year in clear, practical terms, with real examples from day-to-day payroll.
What do employer thresholds actually mean?
In simple terms, thresholds are the earnings limits at which employer obligations kick in.
They determine:
- When employer’s National Insurance (Class 1 secondary NICs) becomes payable
- Whether an employee counts for PAYE and NIC reporting
- When zero-rate NIC rules apply (e.g. under-21s and apprentices)
- Whether you must pay the Apprenticeship Levy
- How much benefit you get from the Employment Allowance
Get the thresholds right, and your payroll is predictable and compliant.
Get them wrong, and costs escalate quietly in the background.
Key employer thresholds for 2025–2026 (UK)
Below are the core thresholds UK employers need to understand for the 2025–26 tax year (6 April 2025 to 5 April 2026).
Employer National Insurance thresholds (Class 1)
| Threshold | Annual amount | What it means for employers |
| Lower Earnings Limit (LEL) | £6,396 | Employee qualifies for NIC record but no NIC due |
| Secondary Threshold (ST) | £9,100 | Employer NIC starts above this level |
| Upper Secondary Threshold (UST) | £50,270 | 0% employer NIC for under-21s & apprentices up to this |
| Employer NIC rate | 13.80% | Charged on earnings above the ST |
Key point:
You start paying employer NIC once an employee earns more than £9,100 per year, even if they personally pay little or no NIC.
PAYE and reporting thresholds
Even where no tax is deducted, reporting obligations still apply.
You must operate PAYE if an employee earns:
- £123 per week or more (£533 per month), or
- Receives benefits, expenses, or has another job or pension
This catches many micro-employers off guard, especially family-run businesses.
Apprenticeship Levy threshold
The Apprenticeship Levy applies when:
- Your annual pay bill exceeds £3 million
- You pay 0.5% on the excess, less the £15,000 allowance
Most SMEs won’t pay the levy but growing businesses can cross this threshold faster than expected.
Employment Allowance (why thresholds really matter)
The Employment Allowance lets eligible employers reduce their employer NIC bill by up to £5,000 per year.
Since recent reforms:
- The £100,000 NIC cap has been removed
- Most SMEs with employees qualify
- You must still understand thresholds to claim correctly
Failing to apply this allowance is one of the most common payroll oversights I see.
How threshold changes affect employers in practice
Thresholds don’t just sit in the background; they directly shape your staffing costs.
Even a small wage increase can:
- Push earnings above the Secondary Threshold
- Trigger employer NIC for the first time
- Increase costs by 13.8% on the excess
That’s why thresholds matter more than headline pay rates.
Real-world employer examples
Person A: Small business with 3 minimum-wage employees
Scenario
- 3 employees
- Each earning £11,500 per year
- No previous payroll experience
What happens
- Earnings exceed the £9,100 Secondary Threshold
- Employer NIC due on £2,400 per employee
Cost calculation (per employee)
£2,400 × 13.8% = £331.20
Total employer NIC bill
£331.20 × 3 = £993.60 per year
Without understanding thresholds, this cost often comes as a surprise.
Person B: Growing company crossing new thresholds
Scenario
- 18 staff
- Annual payroll increases from £2.8m to £3.1m
- Business expansion year
Impact
- Crosses the Apprenticeship Levy threshold
- Levy due on £100,000 excess
Levy calculation
£100,000 × 0.5% = £500
This is in addition to existing employer NIC costs, not instead of them.
Common payroll mistakes employers make with thresholds
From experience, these are the errors that cause HMRC issues:
- Assuming no PAYE means no reporting
- Forgetting employer NIC starts before employee NIC
- Missing Employment Allowance claims
- Misapplying under-21 or apprentice NIC reliefs
- Budgeting wages without factoring threshold crossings
None of these are reckless but all are avoidable.
How employers can stay compliant in 2025–26
To stay on the right side of HMRC:
- Review payroll before pay rises or new hires
- Check earnings against all relevant thresholds
- Use annual equivalents, not just weekly figures
- Keep RTI submissions accurate and on time
- Reassess eligibility for Employment Allowance annually
Thresholds don’t just affect tax, they affect business planning.
Accountant’s summary: what employers should take away
If you remember nothing else:
- Thresholds drive employer costs, not just pay rates
- Employer NIC starts earlier than many expect
- Growth often triggers new obligations quietly
- Small misunderstandings can snowball into large liabilities
The 2025–2026 tax year doesn’t introduce radical reform but frozen thresholds mean more businesses pay more, sooner.
Understanding where the lines are drawn is one of the most valuable things an employer can do.
