A proposed National Insurance cut for under-25s could lower the cost of hiring younger staff, and for small employers watching every payroll line that matters. The idea, reported by Real Business in its coverage of how a proposed National Insurance cut for under-25s could help businesses, would reduce the employer National Insurance contributions (the tax you pay on top of a salary, often shortened to NICs) on wages paid to younger workers.
Here is the direct answer for a busy owner: nothing has changed yet. This is a proposal, not law. But if it goes ahead, hiring someone in their early twenties could become noticeably cheaper than hiring an older colleague on the same salary, which would give small firms a reason to bring on apprentices, school leavers and graduates, and lean on affordable HR tools to manage that hiring growth. Below we explain what employer National Insurance costs today, what the proposal would change, and how to plan sensibly without betting the shop on a policy that may still shift.
What employer National Insurance costs you now
When you employ someone, you pay their gross salary plus employer National Insurance on top. As of the 2025/26 tax year, the employer (secondary) rate is 15%, and you start paying it once an employee earns above the secondary threshold of £5,000 a year. That is a real cost that sits outside the wage itself, and it is one of the biggest reasons hiring feels expensive.
Here is a rough example. Pay a full-time employee £28,000 and, very roughly, you owe employer National Insurance of around 15% on the slice above £5,000, which is about £3,450 a year. That figure is on top of pension contributions, holiday pay and the salary. For a small firm hiring its first or second member of staff, an extra few thousand pounds a head changes the maths quickly.
There is already a relief that many owners miss. Employers pay 0% secondary National Insurance on earnings up to the Upper Secondary Threshold (£50,270 in 2025/26) for employees under 21, and for apprentices under 25. So if you hire a 19-year-old on £24,000, you currently pay no employer National Insurance on that wage at all. The full HMRC detail sits in the National Insurance rates and categories guidance on gov.uk.
What the proposed cut would change
The proposal, as reported, would extend cheaper or zero employer National Insurance to more young workers, closing the gap between the under-21 relief that already exists and the under-25 group that currently attracts the full 15% once they turn 21 (unless they are apprentices).
In plain terms: a 23-year-old graduate you hire today costs you full employer National Insurance. Under a broader under-25 relief, that same hire could cost you nothing in employer NICs up to a set threshold, saving you thousands a year per person. For a growing firm taking on three or four younger staff, that is real money you could put back into wages, training or equipment.
We should be clear about the limits of what is known. The exact age band, the earnings threshold and the start date are not settled, because this is a proposal rather than confirmed legislation. Treat any specific figure you see quoted as indicative until the government publishes firm rules. Policy on employment costs moves often, as anyone who followed the recent changes to day-one employment rights for UK small employers will know.
What this could mean for your hiring plans
If the cut lands, the case for hiring younger changes in three practical ways:
- Cheaper entry-level roles. Reception, junior sales, warehouse, kitchen and admin roles often suit under-25s, and a National Insurance saving makes those hires easier to justify.
- Stronger case for apprenticeships. The apprentice relief already exists; a wider under-25 cut would reward bringing young people in and training them up rather than paying a premium for experience you could grow yourself.
- Better cash flow on payroll. Lower NICs mean lower monthly outgoings, which frees up working capital. If you are also weighing up asset finance for vehicles or equipment, a payroll saving can make the sums add up sooner.
A word of caution: age should never be the deciding factor on its own. Hiring purely to chase a tax break, rather than for the skills you need, tends to cost more in the long run. Use any saving to make a good hire affordable, not to force a poor one.
Get your payroll software ready
Reliefs like this live or die on getting the National Insurance category letter right. That is the code in your payroll that tells HMRC which rate applies. The under-21 and apprentice reliefs already use specific letters, and any new under-25 relief would work the same way. Good payroll software applies the correct letter automatically once you enter a date of birth, so you claim the relief without doing sums by hand.
Most UK small firms run payroll through the same tool as their accounts, or a dedicated package. It is worth knowing the shortlist, including the smaller British names, not just the giants. Our roundup of UK small business software every owner should consider goes wider, but here is how the main payroll options compare.
| Provider | Best for | Handles NI category letters | Rough pricing |
|---|---|---|---|
| BrightPay | Payroll-only firms and bureaux wanting depth | Yes, automatic by age | Annual licence, from low tens of pounds per year for small headcounts |
| Sage Payroll | Established SMEs already on Sage accounts | Yes | Monthly, scales with employee numbers |
| Xero Payroll | Firms wanting payroll inside their accounts | Yes | Add-on to a Xero subscription |
| QuickBooks Payroll | Sole traders and micro-firms on QuickBooks | Yes | Add-on to a QuickBooks plan |
| Employment Hero | Growing teams wanting payroll plus HR in one place | Yes | Per-employee monthly pricing |
| Moorepay | Firms wanting managed payroll and compliance support | Yes | Quote-based managed service |
Pricing changes and depends on headcount, so check each vendor for a current quote. The point is that all of them handle age-based reliefs, so whichever you choose, a new under-25 rule should flow through with little manual work on your side.
Frequently asked questions
Is the National Insurance cut for under-25s confirmed?
No. It is a proposal at the time of writing, not enacted law. Watch for a government announcement and updated HMRC guidance before you build it into fixed budgets.
Do I already get any National Insurance relief for young staff?
Yes. Employers currently pay 0% secondary National Insurance on earnings up to £50,270 (2025/26) for employees under 21 and for apprentices under 25. If you employ young staff and are paying the full rate, check your National Insurance category letters, because you may be overpaying.
How much could a wider under-25 cut save me?
It depends on the final threshold, which is not yet set. As a guide, employer National Insurance runs at 15% on earnings above the threshold, so on a £24,000 salary that is roughly £2,850 a year per employee that a relief could remove. Treat any number as indicative until the rules are published.
Would this apply to directors and existing staff, or only new hires?
The existing age reliefs apply based on age and category, not on whether someone is a new hire, so an extended relief would most likely cover current under-25 employees too. The detail will depend on the final legislation.
Does the Employment Allowance still apply on top?
The Employment Allowance, which lets eligible employers reduce their annual employer National Insurance bill, is a separate relief. Whether the two interact will be set out in any final rules. Speak to your accountant to avoid double-counting a saving.
What to do next
- Check your current reliefs today. Confirm every under-21 and apprentice on your payroll is on the correct National Insurance category letter, so you are not overpaying while you wait for any new rule.
- Model the saving before you hire. Ask your payroll software or accountant to show the cost of an under-25 hire with and without the proposed relief, so you can plan on real numbers rather than guesses.
- Keep an eye on the source. Follow the Real Business report and the gov.uk National Insurance guidance for confirmation before committing.
- Make sure your systems are ready. If your payroll tool is dated, review your options now so any new relief applies automatically the day it starts.
