As of the 2025/26 tax year, the employer’s National Insurance contribution (NIC) rate has risen from 13.8% to 15%. The government introduced this change to generate additional revenue for public services. While the percentage may seem small, many small businesses will feel the effect through higher monthly outgoings. In this blog, we look at what the increase in employer’s NI means, how it affects smaller companies, and how you can manage the extra burden.
Why employer’s NI has gone up
Employer’s NI helps fund healthcare, pensions, and a range of state benefits. Each year, the government reviews National Insurance thresholds and rates, and adjusts them based on fiscal goals and economic circumstances. With growing pressure on public spending, policymakers decided to raise the employer’s NI rate for 2025/26. According to the latest update from HM Revenue & Customs (HMRC), employers will contribute 15% on earnings above the secondary threshold of £5,000.
Impact on small businesses
For a small business, every penny matters. The increased rate means you pay a bit more for each employee who earns above £5,000 a year, which can quickly add up if you have multiple staff members. Even businesses with part-time or seasonal workers need to set aside extra funds to cover the additional employer contributions.
Some employers might also find that wage rises, bonuses, or extra overtime push certain employees over the secondary threshold. That increase in total pay leads to a corresponding rise in your NIC bill. If you are in a sector like construction, engineering, or tech, where skilled professionals often earn above the threshold, the effect on your annual budget may be more noticeable.
Effects on cashflow
With the higher employer’s NI rate, small businesses must pay closer attention to monthly outgoings to avoid surprises. Your company might usually break even or remain cash-positive without trouble, but even a small increase in overheads can cause shortfalls if unaccounted for. If you prefer to pay employees weekly, you may notice changes sooner than companies that operate monthly payroll. A small spike in weekly employer contributions can reduce your available funds, which can affect everything from supplier payments to staff recruitment plans.
Potential repercussions for growth
If you have been planning to hire additional staff or invest in new equipment, the increased NI rate could mean you need to review your budget. Some business owners might decide to delay expansion until they have more predictable cashflow. Others might feel extra pressure to raise prices or cut costs in other areas. You do not need to abandon your growth strategy, but it helps to be aware of the new figures and factor them into your forecasts.
Strategies to manage the added costs
- Review your employment structure
If your employees are close to the threshold, you could consider offering more flexible working arrangements or staggering work hours. This does not mean you should limit pay progression. Instead, it might help you balance staff costs throughout the year and ensure you do not overshoot your monthly wage bill. - Make full use of the Employment Allowance
The Employment Allowance can reduce your employer’s NIC bill by up to £10,000 per year from April 2025, provided your business is eligible. Many small businesses forget to claim or do not realise they qualify for the allowance. Double-check your eligibility on the HMRC Employment Allowance page and factor this into your calculations. - Automate payroll processes
Manual payroll systems make it harder to spot changes. Automated software or cloud-based solutions can alert you when you exceed thresholds or approach the next NIC bracket. They also reduce human error and make real-time reporting more accurate. - Forecast regularly
Financial planning is not just for large corporations. A robust forecast allows you to spot cashflow gaps before they become problems. Update your forecasts at least quarterly – monthly if you have a fast-moving business – and include employer’s NI in your overheads. This way, you can adjust quickly if the cost of employer contributions rises more than expected. - Consider other methods of staff remuneration
Some businesses offer benefits in kind or share schemes instead of pure salary increases. If used correctly, these can reduce the amount of earnings subject to NIC. However, it is important to follow the rules on what counts as a taxable benefit. If in doubt, seek professional advice so you stay compliant with HMRC regulations. - Seek professional guidance
At PBA Accountants, we work with businesses in construction, engineering, and tech to help them plan for changes in tax legislation. You do not have to handle these updates on your own. Our team can show you how to incorporate the new employer’s NI rate into your financial strategies and support your business goals. For more insights on our approach, visit our services page or contact us directly to discuss your situation.
Monitoring the road ahead
We expect further adjustments to National Insurance in future tax years, especially with changing economic circumstances and government policy. Keeping an eye on updates from HMRC is key, as is filing accounts on time with Companies House. Late submissions or missed payments can lead to penalties, which add to your financial challenges.
If you find yourself unsure about compliance or the best way to manage your finances, professional help can be a good investment. Our clients often feel more confident after they have precise figures and a clear plan. This leads to better decision-making when it comes to staff hires, equipment purchases, or business expansion.
Summing up
The rise in employer’s National Insurance from 13.8% to 15% for 2025/26 will affect many small businesses. By reviewing your employment structure, claiming all available allowances, automating payroll, and seeking specialist advice, you can keep your finances on track.
If you would like guidance on how the new rate affects your business or advice on planning for future changes, call or email us. We will be happy to help you find solutions that suit your budget and goals.
Talk to us about reviewing your employer’s NI obligations and how to plan effectively. We are ready to help you keep moving forward.