HMRC update on National Insurance changes as this group will have 'nothing to pay'

(NI) bills will be increasing next year but the Government has pointed out that one group will pay nothing at all.

Conservative MP Damian Hinds quizzed ministers on if they would adjust childcare hourly funding rates in light of changes coming in to employer NI contributions.

Chancellor Rachel Reeves announced in the Autumn Budget that the NI rate that employers pay will increase from 13.8 percent to 15 percent.

In his response, education minister Stephen Morgan pointed out that some employers will not have to pay the levy at all.

He explained: "The Employment Allowance will be worth up to £10,500 for eligible providers, meaning smaller providers may pay no National Insurance at all in 2025/26."

Under the current Employment Allowance, certain employers can reduce their NI liability by up to £5,000 for the tax year, with this increasing to £10,500 from the start of the new tax year in April.

Addressing the question of childcare, Mr Morgan said: "As announced at Budget, the department expects to provide £8.1billion for early years entitlements in 2025/26, which is around a 30% increase compared to 2024/25, as we continue to rollout the expansion of the entitlements to eligible working parents of children aged from nine months.

"The department is looking at what changes announced in the Budget will mean for the early years sector and will announce more details as soon as possible."

He also said the Department for Education is "working at pace" to publishing funding rates for 2025/26, as this is important information both for local authorities and for providers.

Working parents with children aged nine months old and above can currently get 15 hours a week of free childcare, with the scheme to expand to all under-5s next year.

Employer National Insurance is different from the version of the tax that employees pay as a deduction from their earnings.

The main rate of employee NI is at 8%. The rate was reduced twice this year under the previous Conservative Government, dropping from 10 percent to the current 8% in April 2024 and from 12% to 10% in January 2024.

Paying your National Insurance builds up your entitlement to the state pension. You need at least 10 years of full contributions to get any state pension.

A person typically needs 35 years of contributions to get the full new state pension, of £221.20 a week, and 30 years' worth to qualify for the full basic state pension, of £169.50 a week.

State pensioners will get a 4.1 percent boost to payments in April in line with the triple lock, meaning the full new state pension will go up to £230.30 a week while the full basic state pension will go up to £176.45 a week.