The April rise in National Insurance (NICs) significantly impacts businesses, particularly employers. This includes an increase in the rate of NICs paid by employers (from 13.8% to 15%) and a lower threshold for NI liability, shifting more costs to employers. The result? Increased payroll costs, potential layoffs, and tough operational decisions.
These changes are set to make 2025 a challenging year for many UK SMEs. A flexible finance solution could relieve the pressure. Could a business loan give you breathing room? Could you unlock funds against existing assets? Below, we explore what the National Insurance rise means—and how you can offset the cost.
What Is the 2025 Employers’ National Insurance Rise?
The 2024 Autumn Budget outlined major NI changes for employers. From 6 April 2025, the employer NIC rate increased from 13.8% to 15%.
In addition, the threshold at which employers start paying NICs (the secondary threshold) dropped from £9,100 to £5,000 per year. This means businesses will pay NICs sooner.
To help small businesses manage this rise, the Employment Allowance has doubled from £5,000 to £10,500, and the £100,000 eligibility cap has been removed.
How Will Rising NICs Impact UK Businesses?
Not every business will feel the changes the same way. Some may benefit from the increased Employment Allowance. But many face higher payroll costs, especially those with low-wage workers. 2025 could be the most expensive year on record for such businesses.
The Centre for Policy Studies reports: “The rise in employers’ National Insurance and the threshold cut means 21.3% of the cost of employing a full-time minimum wage worker will go in tax. Coupled with the minimum wage increase, it will cost businesses £2,367 more than in 2024.”
5 Ways SMEs Can Offset Higher Payroll Costs
1. Review Your Finances & Improve Forecasting
Strong financial reporting is key to resilience. Take time to review reports and dashboards. You’ll spot potential cash flow issues, reduce costs, and improve decision-making.
2. Use Automation to Streamline Spending
AI and automation tools help businesses cut waste and analyse data. These tools provide insights that support smarter, faster financial decisions.
3. Explore Tax Reliefs to Reduce Liabilities
Speak to your advisor about tax-saving options. Innovation credits, electric fleet upgrades, and donations can reduce your overall tax burden.
4. Consider Outsourcing to Cut Overheads
Outsourcing marketing or HR to contractors can reduce payroll strain. You may also pay less in National Insurance contributions for contractors.
5. Use Business Finance to Stay in Control
If you’re thinking, “Why change what works?” business finance might be your solution. It lets you keep operations running smoothly while injecting the cash you need for growth.
Why Choose White Oak UK for Business Finance?
Our business finance products support UK SMEs through challenging times. Whether you need working capital or are investing in operational efficiency, we’re here to help. Our flexible finance options let you:
✅ Invest in smart cost-saving tools
✅ Retain & grow your team with confidence
✅ Improve cash flow instantly
Check your eligibility instantly – no credit impact.
Get in touch with us today to discuss your options or get an instant eligibility check
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