NEW DATA REVEALS TRUE IMPACT OF NATIONAL INSURANCE HIKE ON SMES

Last Updated Jan 13, 2026

Employment Hero’s analysis of 4600 SMEs shows NIC changes will cost the average business of 31-50 employees £18,000 per year.
Businesses with fewer than 8 employees are likely to benefit on net thanks to Employment Allowance extension.
Changes likely to further slow employment growth, which has decreased by 0.3% per month since the October Budget announcement
Small London businesses face some of the steepest costs, but Midlands firms with 31-50 staff will be hit hardest.

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LONDON, 6 APRIL 2025: The imminent changes to employer National Insurance Contributions (NICs) will hit medium-sized businesses hard, with companies employing 20 or more staff facing costs of £8,472 annually, according to new analysis from Employment Hero.

The changes, which come into effect on Sunday, 6 April, were announced in the October Budget and have been met with concern from the business community.

Employment Hero’s analysis found that while the very smallest employers may benefit due to the extension of the Employment Allowance to £10,500, businesses with more than 8-10 employees will face significant additional costs, especially in higher-wage regions like London.

This follows concerning employment trends identified in Employment Hero’s latest SmartMatch Employment Report, which uses real-time data from 105,000 employees across UK SMEs. The report has shown that employment has contracted by an average of 0.3% every month since the NIC hike was announced in October, including a 0.4% decline in February alone.

Graph showing average net impact of National Insurance changes on UK businesses by size and region. Negative impacts are in orange, positive in purple.

Kevin Fitzgerald, UK MD of Employment Hero commented:

“These NIC changes create a significant burden for growing businesses at exactly the wrong time. Our data clearly shows that employers have been preparing for these increased costs since the announcement by slowing hiring, particularly among younger workers who have seen employment fall by 1.8% in February alone.”

“While the smallest businesses may benefit from the Employment Allowance extension, the cost escalates rapidly once you pass about 8-10 employees. A medium-sized business with 20 or more staff is looking at over £8,400 in additional annual costs – money that could otherwise be invested in growth, innovation, or higher wages. Larger firms are looking at close to £18,000 on average.”

“Regional differences are stark too – smaller businesses in London face costs sooner due to higher average salaries. You shouldn’t be punished for wanting to pay your staff enough to survive in an incredibly expensive city. Elsewhere, large firms in the Midlands have the highest average cost at almost £30,000.”

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