Authored by Amy Hancock, Owner of Accountancy Practice, Hancock & Hastings in partnership with QuickBooks.
April 2025 is bringing a double hit of extra cost that businesses can’t ignore—National Insurance is going up, and it’s employers who are picking up the tab. Employer NICs are rising from 13.8% to 15%, plus the threshold drops from £9,100 to £5,000. On top of that, the National Minimum and Living Wage is increasing, adding even more pressure to wage bills. For many small businesses, this combination means a significant extra cost.
With soaring inflation, rising payroll costs, and an imminent National Insurance hike, small businesses should be battening down the hatches…but the latest data paints a different story—small businesses aren’t just surviving they’re thriving and hiring. In fact, 54% of UK entrepreneurs plan to hire in 2025, defying expectations and doubling down on growth. The Intuit QuickBooks Small Business Index* also shows that small businesses added 6,000 new jobs in February alone.
But don’t worry, there are ways to plan ahead and reduce the impact. Here’s what you should be thinking about:
- Claim the Higher Employment Allowance
- What’s changing? The Employment Allowance is increasing from £5,000 to £10,500. One bit of good news amongst all the rising costs!
- Why it matters: This allowance effectively reduces your employer NIC bill, and with the increase, it can now cover even more of the additional NIC cost you’ll be facing.
- What to do: If your NIC bill is under £100k, make sure you’re claiming it. It’s simple to apply via HMRC’s payroll system, and it’s one of the easiest ways to offset the hike. If you’ve not claimed before, double-check your eligibility and get it sorted before your next payroll run.
- Use Salary Sacrifice Schemes
- How does it help? Salary sacrifice allows employees to exchange part of their salary for benefits like pensions, electric cars, or cycle-to-work schemes. Their taxable salary drops, meaning both your NIC and their tax bills reduce.
- Why it matters: It’s a tax-efficient way to offer attractive perks to your team without increasing payroll costs. With NIC rates increasing, every pound saved through salary sacrifice counts.
- What to do: Review what benefits you could introduce or expand. Even small schemes like additional pension contributions can save you money and appeal to staff looking for long-term rewards.
- Review Your Workforce Setup
- Why it matters: The lower NIC threshold means more of your wage bill is now taxable. If you’re carrying excess staff costs, you could be paying more NIC than you need to.
- What to do: Look at the structure of your team. Could some roles be done on a freelance or part-time basis? Could you outsource certain tasks? This isn’t about cutting jobs, it’s about making sure your payroll setup is as efficient and flexible as possible to avoid unnecessary costs.
- Invest in Automation and Tech
- What’s the benefit? Every employee added to your payroll increases your NIC bill. But investing in technology and automation can cut down on manual tasks, reduce the need for extra staff, and help you keep payroll lean.
- Why it matters: Long-term, this investment can save you both time and money. Whether it’s new payroll software, accounting tools, or systems that streamline admin, cutting down on repetitive tasks reduces the pressure to hire and keeps NIC costs under control.
- What to do: Review your processes. Are there areas where automation could ease the workload? A small investment now could save you significant amounts in payroll taxes later.
- Offer Tax-Free Perks Instead of Pay Rises
- What’s the idea? Pay rises increase your overall wage bill and with NIC rates climbing, they’ll cost you even more. But benefits like pensions, share schemes, or health plans don’t attract the same NIC charge.
- Why it matters: You can still reward and retain staff without inflating your payroll costs. Offering tax-efficient perks keeps your team happy and reduces the amount you’re handing over in NIC.
- What to do: Look at the perks available through HMRC-approved schemes. Consider topping up pensions, introducing a share scheme, or offering health benefits. It’s a smarter way to give value without adding to your tax burden.
Final Thoughts:
The National Insurance rise doesn’t need to derail your business but the key is to be proactive and plan now. There are plenty of ways to soften the blow and keep costs manageable without compromising on your team or growth plans.
Other key data from the latest Intuit Accounting for the SMB Economy report** includes:
- Increases in SMB headcount occurred across the board in the last year:
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- 16% of SMBs with 1-9 employees expanded their teams
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- 39% with 10-49 employees increased headcount
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- 52% of mid-sized businesses with 50-99 employees hired new employees
- Sectors that demonstrated the highest increases include HR (57%), financial services (48%), IT & Telecoms (47%)—industries still looking for talent**
- 29% believe that hiring skilled workers will increase business growth the most***
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*Intuit QuickBooks Small Business Index surveying 25,000 small businesses in the UK, March 2025
**‘Intuit QuickBooks ‘Accounting for the SMB Economy’ report surveying 4,000 small and medium-sized enterprises in the UK, March 2025
***Intuit QuickBooks “Entrepreneurship in 2025” Report. Online predictions survey of 3,000 adults in the UK, commissioned by Intuit QuickBooks, November 2024