Guidance for members on changes to National Insurance and National Minimum Wage

The Autumn 2024 budget announced changes to employer National Insurance contributions effective from April 2025, with the rate paid by employers rising from 13.8% to 15% and the earnings threshold at which NI must be paid being reduced from £9,100 to £5,000. This means that any employee who is paid more than £5000, will trigger an employer’s NI contribution for the business.

In order to aid small business, the ‘employment allowance’ which is a tax break for smaller businesses, has increased from £5,000 to £10,500. This allowance is the amount of employer’s NI liability that a business is allowed to accrue before there is a requirement to pay the employer’s NI to HMRC. Previously to be eligible for the employment allowance, the total employer Class 1 NI liabilities had to be less than £100,000. It has been confirmed that this is no longer a restriction to claiming, meaning larger businesses can also take advantage of the increased threshold to offset some of the rise in employers NI.

Who is eligible for the Employment Allowance?

The Employment Allowance can be claimed by most employers who pay secondary Class 1 NICs on their employees. This includes:

• Businesses (includes sole traders, companies and partnerships) who have employees
• Franchises – however if a franchise holder controls more than one of the same type of franchise (for example, they all trade under the same trade name) then the Employment Allowance can only be claimed once for all of those franchises combined.

Note: Single director businesses cannot claim if they do not have employees liable for secondary Class 1 NI.

A business does not qualify for the Employment Allowance if it is a public body or during that tax year is doing more than half its work in the public sector (such as local councils and NHS services). In relation to this activity, public authority means any employer whose activities are wholly or mainly (i.e. 50% or more) public in nature and are mainly publicly funded. Common examples of public bodies are often:

• NHS services
• GP services where patients take up the majority of the GP’s work.

Most optometry practices derive their income from a number of sources. This includes NHS sight test fees, NHS fees for enhanced services and NHS fees that are paid via NHS optical vouchers towards spectacles. Some practices may also hold other NHS contracts with local hospitals. Alongside this will be private sight test and examination fees and private sales. For many practices the amount of income from NHS sources will be less than 50% of their turnover meaning they should be eligible to claim the allowance.

In order to assess eligibility, opticians or optometrist businesses would simply need to be able to pass the less than 50% publicly funded test. When considering the proportion of the business that is of a public nature the advice AOP have obtained suggests there are two approaches that can be used.

• A business can consider turnover derived from the publicly funded activities
• Number of employees engaged in publicly funded duties or the percentage of time spent on publicly duties.