Higher Employer NICs in 2025

Higher Employer NICs in 2025: Action Plan for Small Businesses

The cost of hiring employees in the UK has increased since April 2025. Employers’ National Insurance contributions (NICs) have increased, which is the primary cause of this.

This change may have an impact on your cash flow, profits, and personnel expenses if you manage a small or medium-sized business (SME).

But don’t worry our expert accountants at Taxaccolega will explain and give their expert advice on employer NIC increase, how it may impact your business, and what you can do to manage it.

What’s New?

Three important changes were applied by the government on 6 April 2025:

A higher NIC rate:

• Before: Employers paid 13.8% in NICs on workers’ salaries over a specific threshold.

• After: Employers pay 15%, which means that each employee contributes more money to HMRC.

Lower threshold:

• Before: NICs were only paid on employee earnings above £9,100 annually.

• Now: NICs must now be paid on earnings above £5,000 annually.

• This implies that NICs are now paid on a greater portion of each employee’s pay.

Increased Employment Allowance

• Previously: You could save up to £5,000 annually on your entire NIC

• As of right now, that allowance has grown to £10,500.

• Additionally, more small businesses in London are now eligible to receive this allowance because the £100,000 earnings cap has been removed.

Employer NIC Costs for a full time Minimum Wage Employee

Details	Before April 2025	After April 2025
Our Wage	£11.44	£12.21
Hours Per Week	37.5	37.5
Weeks Per Year	52	52
Annual Salary	£22,308.00	£22,308.00
NIC Treshhold	£9,100.00	£5,000.00
Taxacle	£13,208.00	£18,809.00
NIC Rate	13.80%	15%
NIC Payable	£1,822.70	£2,821.43
Extra Cost Per Employee		£998.72

How This Affects Your Business

Some businesses will benefit from the higher Employment Allowance. But for many, the increase in NICs will lead to:

Increased Payroll Expenses

What does this signify?

Every employee in your company will now receive a higher NIC payment, particularly if they make more than £5,000 annually. Your company will need to pay more for wages and salaries as a result of the NIC rate increase from 13.8% to 15%.

For instance, your payroll expenses may increase affectedly if you employ a large number of people or minimum wage workers.

Lower profits

What does this signify?

Your company will make less money since it is spending more on NICs (and possibly other growing expenses). This implies that after all costs (such as salaries, bills, and taxes) are covered, you have less money.

For instance, your profit margin—the amount of money left over after expenses—will decrease even if your revenue remains constant. This is because you will have to pay more in NICs and other expenses.

Less cash available for growth or hiring

What does this mean?

Your company can have less money to invest in expansion or hiring additional staff if expense is higher and profit is lower. This might restrict your company from expanding, creating new avenues, or having more work.

For instance, if your expenses are increasing, you may opt to postpone the recruitment of more staff, the purchase of new machinery, or the establishment of a new branch in a bid to budget for the increased NIC costs.

Greater Effect on Bigger Teams

The impact of these changes will be even greater if you have a large workforce. Each person will pay a higher NIC, which could result in numerous additional expenses.

For instance, one business disclosed that the increase in NICs will result in a £400,000 increase in staff expenses the following year. As a result, they may need to lay off 20 workers in order to cover the additional expenses.

Strategies for managing higher NIC costs

You don’t have to panic. There are steps you can take to save costs and keep your business strong. Here are some suggestions:

1. Check if you can claim the new Employment Allowance

The Employment Allowance allows small businesses to save their NIC bill by up to 10,500 a year.

Example: If you hire 3 employees, this allowance might cover most or all of your NICs for them!

We can help you on employer NIC solutions at Taxaccolega work out whether you qualify and claim the employment allowance to reduce your NIC payment.

2. Use salary sacrifice

This means employees can exchange part of their salary for things like pension contributions. This reduces your NICs.

For instance, you can save £300 in NICs (15% of £2,000) if an employee agrees to take £2,000 less in salary and you put it into their pension.

To maximise your NICs and employee benefits, our skilled accountants at Taxaccolega can help you set up a salary sacrifice plan.

3. Use freelancers or self-employed workers

Think about using contractors or freelancers rather than full-time employees. Employer NICs are typically less expensive.

For instance, it may be less expensive to hire a freelancer rather than hire a full-time staff member if you need assistance with a project.

4. Outsource where possible

Consider outsourcing jobs like payroll, marketing, or HR to reduce permanent staff costs.

Example: By outsourcing your payroll processing to experts like Taxaccolega, you can reduce the cost of hiring full-time staff and improve your efficiency.

Our team at Taxaccolega provides professional outsourcing services, helping you streamline operations and reduce costs.

5. Let more staff work from home

If more people work remotely, you may be able to rent a smaller office and save money.

Example: With more staff working from home, you can free up your office space and save money on your bills.

6. Review all your spending

Go through every expenditure in your business subscriptions, vendors, services and figure out what you truly need.

Example: A company saved £1,000 a year by ending software they weren’t using.

7. Use better financial tools

With modern accounting software and cash flow boards, you can track expenses, monitor cash flow, and see early on where savings opportunities exist.

Example: With the right tools, it’s easy to spot where you’re overspending and make good choices.

At Taxaccolega, we offer financial consulting services and can recommend the best bookkeeping software to assist you in optimising your business finances.

8. Ask your staff for cost-saving ideas

Your staff may have innovative suggestions they understand where time and money are being wasted.

How Other London Businesses Are Responding

Many small and medium-sized businesses (SMEs) in the UK are taking steps to deal with growing staff costs and NIC increases, so you’re not alone. Here are some instances of what other people are doing:

An energy start-up has paused all hiring and is carefully reviewing its spending to stay on track.

A theatre school’s staff costs have increased by about £60,000 annually, so they intend to raise prices and postpone new projects.

Several SMEs in Croydon are cutting back on staff hours, eliminating unnecessary software subscriptions, and looking into less expensive ways to provide services, such as working remotely or online.