Employer National Insurance and the Employment Allowance: What Property and Construction Companies Need to Know

Every property company running its own payroll took a real cost increase on 6 April 2025, whether or not anyone in the finance function noticed at the time. Employer National Insurance rose from 13.8% to 15%, and the threshold at which it starts to bite fell sharply — from £9,100 to £5,000 a year per employee. For a small property SPV with a single director on payroll and nobody else, though, the headline giveaway that's meant to offset all this — a bigger Employment Allowance — usually isn't available at all.

The mechanics: higher rate, lower threshold

Employer (secondary) Class 1 National Insurance is charged on top of gross pay, on the slice of each employee's earnings above the secondary threshold. From 6 April 2025 that rate rose from 13.8% to 15%, and the threshold itself was cut from £9,100 a year to £5,000 — frozen at that level, on current plans, until April 2028. The combined effect is bigger than the headline 1.2 percentage point rate rise suggests: with roughly £4,100 more of every employee's salary now sitting above the threshold, and taxed at a higher rate, employer NIC on a typical £40,000 salary has increased by well over £800 a year.

The Employment Allowance doubled, but not for everyone

The government's answer to the rate rise was to increase the Employment Allowance — the amount by which an employer's total employer NIC bill is reduced each year — from £5,000 to £10,500, and to remove the rule that previously blocked any employer with a secondary NIC bill above £100,000 the year before from claiming it at all. For a genuinely small employer with a spread of staff, that's a real offset. But there's a restriction that catches out exactly the kind of company a lot of property developers run: if the only employee earning above the secondary threshold is also a director, and there's no other staff member on the payroll, the company cannot claim the Employment Allowance at all. A single-director development SPV paying itself a modest salary and taking the rest as dividends gets no relief from the higher rate whatsoever — it simply pays more.

Connected companies still share one allowance

Where several companies sit under common control — the usual pattern for a developer running a project management or construction company alongside a cluster of SPVs — only one Employment Allowance is available across the whole connected group, exactly as with the Apprenticeship Levy allowance. It has to be claimed against one company's payroll, not spread across several, so a group running multiple PAYE schemes needs to actively decide which company claims it rather than assuming each one gets its own £10,500.

CIS subcontractors sit outside all of this

Employer NIC, like the Apprenticeship Levy, is only ever charged on an employer's own PAYE pay bill. Self-employed subcontractors paid under CIS aren't employees, so their pay never generates an employer NIC charge, whatever the company's total spend on labour looks like. That's exactly why the rate rise lands hardest on businesses that have brought site management, technical or head office roles in-house as employees rather than engaging them through CIS or as consultants — each one of those roles now costs more in employer NIC alone than it did a year earlier, on top of whatever else has gone up.

What this means in practice

Budget the higher rate and lower threshold into any new hire, not just existing headcount — a £35,000 role now carries noticeably more employer NIC than the same salary did before April 2025. Check whether your company can actually claim the Employment Allowance before assuming it offsets the increase: a single-director company with no other staff on payroll gets nothing from it, however small the business. And if you're running a group of connected companies, make sure someone has actively decided which one claims the allowance, rather than leaving it unclaimed by default because nobody owns the decision.

Common questions

What is the current employer National Insurance rate?

From 6 April 2025, employer (secondary) Class 1 National Insurance is charged at 15% on an employee's earnings above the secondary threshold of £5,000 a year, up from 13.8% on earnings above £9,100 previously.

Can a property SPV with one director claim the Employment Allowance?

Not if that director is the only employee paid above the secondary threshold and there's no other staff member on the payroll. The Employment Allowance specifically excludes companies where a sole director is the only qualifying employee, however small the company otherwise is.

Does the Employment Allowance apply separately to each company in a group?

No. Connected companies under common control share one £10,500 Employment Allowance between them, in the same way they share one Apprenticeship Levy allowance, and the group must decide which company claims it.

Does employer National Insurance apply to CIS subcontractors?

No. Employer NIC is charged only on an employer's own PAYE pay bill, and genuinely self-employed subcontractors paid under CIS are not employees, so their pay sits outside the charge entirely.

This article is general information, not personal tax advice, and tax rules change. Your own position depends on facts we cannot see from here — please take advice before acting on anything above.

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