Employers hit with £28bn National Insurance Shock as rate rise bites harder than treasury forecast

Apr 25, 2026 - 14:00

Employers hit with £28bn National Insurance Shock as rate rise bites harder than treasury forecast

Britain’s employers have been saddled with a £28bn increase in their National Insurance Contributions bill over the past year, a figure that is £4bn higher than the Treasury’s own forecast and one that accountants warn is already forcing redundancies across the high street.

Figures compiled by UHY Hacker Young, the national accountancy group, show that the total cost to employers of NICs rose by 24 per cent in the 12 months to 31 March 2026, climbing from £116bn to £143.9bn. The leap followed the Chancellor’s decision to raise the main rate of Employers’ NIC from 13.8 per cent to 15 per cent on 6 April last year, a policy sold as a targeted measure to shore up the public finances but which critics argue has become a stealth tax on jobs.

Phil Kinzett-Evans, partner at UHY Hacker Young, said the overshoot could not be explained away by wage inflation alone. “The increase in NIC has caused real pain for UK businesses and I’m not sure that the policymakers recognised or admitted this when they increased the tax,” he said.

While Whitehall has cushioned the blow for the public sector, with roughly £5bn earmarked to offset the higher bill, including £515m ring-fenced for local authorities, private employers have been left to absorb the hit themselves. For many, that has meant either passing costs on to customers through higher prices or taking the knife to headcount.

The consequences are already visible in the labour market. A string of high-profile redundancy announcements in hospitality and retail over recent months have been explicitly blamed on the NIC increase, and recruitment activity has slowed as firms think twice before taking on new staff. Research by Reed, the recruitment firm, found that 46 per cent of businesses said the tax rise would influence their hiring decisions.

Kinzett-Evans added that the timing has been particularly unfortunate, arriving just as employers brace for the additional compliance costs baked into the Employment Rights Act. “It’s now fairly widely recognised that the level of tax in the UK has got too high,” he said. “Businesses need to see a sensible economic plan that sees a reduction in the business tax burden.”

With the Chancellor under growing pressure from business groups to ease the squeeze ahead of the next fiscal event, the question of who ultimately pays for the NIC rise, shareholders, staff or shoppers, is fast becoming one of the defining economic debates of the year.