Subscribe to our mailing list
Keep up-to-date with the latest news.
In the 2024 Autumn Budget, Chancellor Rachel Reeves announced changes to Employer’s National Insurance (NI) that will take effect from April 2025. These changes are expected to raise billions in extra tax revenue but will also increase employment costs for businesses—including umbrella companies.
If you’re a contractor working through an umbrella company, these changes could affect your take-home pay. But don’t worry—we’re here to explain what’s happening and how you can prepare.
From 6 April 2025, two key changes to Employer’s National Insurance will take effect:
The Employer’s NI rate is increasing from 13.8% to 15%.
This means that for every £1,000 of earnings above the NI threshold, employers (including umbrella companies) will pay an extra £12 in National Insurance.
The earnings threshold for Employer’s NI is decreasing from £9,100 to £5,000 per year.
This means Employer’s NI will apply to a larger portion of earnings, increasing overall costs for employers.
If you work through an umbrella company, you might be wondering what this means for you. The key thing to understand is that Employer’s NI is deducted from the assignment rate that agencies pay to the umbrella company.
If your assignment rate stays the same, this will mean a larger amount of employers NI will be deducted from the invoice value leaving a lower gross for tax and in turn impact your take home pay.
However, many agencies are already trying to negotiate higher rates with clients to help cover the increase and minimise the impact on contractors.
These changes should lead to shifts in the way businesses engage contractors, potentially benefiting those who work through an umbrella company.
As hiring permanent employees becomes more costly due to higher Employer’s NI and the incoming employment rights bill. We should start to see big businesses look to take on more contractors than ever.
With any tax change, there is always the risk of non-compliant umbrella schemes trying to take advantage of contractors.
If an umbrella company is promising unusually high take-home pay, this could be a red flag. Some of these schemes involve tax avoidance strategies, which could leave contractors facing unexpected tax bills, fines, or even legal action from HMRC.
Always ensure that your umbrella company is fully compliant, transparent about deductions, and operates within HMRC guidelines. If something sounds too good to be true, it probably is.
At Umbrella.co.uk, we understand that tax changes like these can be concerning—especially when they impact your earnings. But you don’t have to figure it all out on your own.
We can help you:
If you’d like to discuss your situation, get in touch with us today. Our team is here to provide clear, straightforward advice and support.
Contact us to learn more.
By staying informed and working with a compliant umbrella company, you can navigate these changes with confidence.