The NICs increase is here—find out how much you could be paying

Since the announcement in the October Budget, businesses have been trying to prepare. However, understanding the true cost of this change has left many in the dark about how much they’ll be paying.

What’s changed?

The headline change is that Employer NICs have now increased from 13.8% to 15% and the secondary threshold will decrease from £9,100 to £5,000 per annum. This will mean you will start paying NIC on the wages of employees on lower salaries than previously.

The government also announced an increase to the Employment Allowance (from £5,000 to £10,500), and has removed the £100,000 eligibility cap meaning more businesses can claim it. However, our data shows that this may only benefit smaller businesses—meaning most small businesses will be paying more.

Who is affected?

If your business has fewer than seven employees, you might actually be better off thanks to the increased Employment Allowance. But for businesses above that threshold, costs start to rise quickly.

We know you’re already working with tight budgets, so to help you understand what this will mean for your bottom line, we’ve crunched the numbers. Using real-time data from over 100,000 employee records on our platform, we’ve estimated the average additional cost for small businesses of different sizes and regions.

Business size	Estimated increased costs (per year)
8-10 employees	£530
11-15 employees	£2,412
16-20 employees	£6,245
21-30 employees	£8,472
31-50 employees	£17,967

What this means for small businesses

For larger sized small businesses, finding £18,000 more per year will be a hard hit. Even more worrying, mid-sized businesses—who are less likely to absorb these costs—might need to find an extra £8,500 per year. 

Rising costs are always a concern. These increases (on top of higher wages) are making it harder to hire. And we can see it in our data. According to our SmartMatch Employment Report, employment has contracted 0.3% every month since the NIC hike was announced in October. In February alone, employment fell by 0.4%, with younger workers seeing the biggest impact.

Simply put, businesses are hesitant to hire, and our economy is already feeling the consequences.

Staying on top of compliance changes

With all these new financial pressures, the last thing you need is more admin or unexpected expenses. However, Employment Hero is here to make things a little bit easier. Tackling compliance changes—like the NI increases—can be difficult when you have limited time. Employment Hero keeps your payroll up to date and compliance effortless, so you can focus on what really matters – growing your business.

*The NIC cost analysis calculated the impact of the new employer National Insurance rate alongside the extension of the Employment Allowance to £10,500, analysing outcomes for businesses of different sizes across various UK regions.

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