UK businesses face £28bn tax burden due to National Insurance hike
The upcoming rise in National Insurance Contributions (NICs) is set to cost UK businesses an additional £28bn this year, based on conservative estimates, with the actual tax burden potentially being much higher.
New data from Novuna, one of the UK’s leading financial services companies, highlights the steep cost increases businesses face due to rising NICs. The basic rate band, comprising over three-quarters of the UK workforce, will rise by 12% equating to £566 per employee, costing businesses an additional £16.7bn alone.
For the two million employees earning the National Living or Minimum Wage in the UK, employers will see contributions rise by £1,044 per worker, representing a 45% increase, amounting to just under £2.1bn nationwide.
Employers of the UK’s 6.31 million higher rate taxpayers will bear the second largest increase per worker, with contributions rising by £1,110, costing businesses in total £7bn. However, employers of additional rate taxpayers face the highest increase per employee at £2,008. This data reveals the impact of these hikes across various employee income bands and regions, underscoring the significant scale of financial strain faced by businesses from April as overheads add to existing pressures and challenges.
Figure 1: NIC increases by income band (2024-2025)
| Employee Persona | 2024 NIC Cost (£) | 2025 NIC Cost (£) | Increase (£) | Employees in UK (Millions) | Total Increased Cost (£ Billions) |
| National Living/Minimum Wage | 2,305 | 3,349 | 1,044 | 2 | 2.1 |
| Basic Rate | 4,845 | 5,411 | 566 | 29.5 | 16.7 |
| Higher Rate | 7,002 | 8,112 | 1,110 | 6.31 | 7 |
| Additional Rate | 17,334 | 19,342 | 2,008 | 1.13 | 2.3 |
Regional disparities in average earnings and workforce sizes mean the NIC increase will hit some areas harder than others. London employers face the highest increase at £1,010 per employee followed by employers in Scotland (£896) while regions such as Wales, the lowest impacted region in total, and Yorkshire will see additional total cost of £2.69m and £4.71m, respectively.
Figure 2: Regional NIC increases in the UK (2024-2025, excluding Northern Ireland)
| Region | Average Salary (£) | 2024 NIC (£) | 2025 NIC (£) | Increase (£) | People in Work (Millions) | Total Cost Increase (£ Millions) |
| Yorkshire | 28,000 | 2,608 | 3,450 | 842 | 5.6 | 4.71 |
| Manchester | 28,000 | 2,608 | 3,450 | 842 | 7.6 | 6.40 |
| Birmingham | 29,000 | 2,744 | 3,600 | 856 | 6.1 | 5.22 |
| London | 41,000 | 4,390 | 5,400 | 1,010 | 8.9 | 9.00 |
| Wales | 28,000 | 2,608 | 3,450 | 842 | 3.2 | 2.69 |
| Scotland | 32,000 | 3,154 | 4,050 | 896 | 5.5 | 4.92 |
Theresa Lindsay, director at Novuna, comments: “The £28bn National Insurance tax bill represents a significant financial burden for UK businesses across all industries and will inevitably force many businesses to radically rethink their hiring and pricing strategies in order to remain sustainable for the long term.
“We’re already seeing the fallout across the sectors we operate in, as businesses grapple with impending cost pressures and explore competitive funding options to maintain liquidity and help them navigate the challenges.
“The added concern is the wider knock-on effect across the economy, if businesses scale back or worse still, stop trading as a result of this tax hike, we could see significant disruption across supply chains which would stall growth in the UK economy.”