British employers were hit with a £28bn rise in their national insurance contributions last year, a figure £4bn higher than the Treasury’s own forecast and accountants warn it is already leading to redundancies across the high street.
Figures compiled by UHY Hacker Young, the national accounting group, show the overall cost to employers of NICs rose 24 per cent in the 12 months to March 31, 2026, from £116 billion to £143.9 billion. The jump followed the Chancellor’s decision to increase the main employer NIC tax rate from 13.8 per cent to 15 per cent on April 6 last year. The measure was sold as a targeted measure to shore up public finances, but critics claim it has become a secret tax on jobs.
Phil Kinzett-Evans, partner at UHY Hacker Young, said the overshoot could not be explained by wage inflation alone. “The NIC increase has caused real pain for UK businesses and I’m not sure policymakers realized or admitted this when they increased the tax,” he said.
While Whitehall has cushioned the blow for the public sector, setting aside around £5bn to offset the higher bill, including £515m earmarked for local authorities, private employers will have to absorb the blow themselves. For many, this meant either passing the costs on to customers through higher prices or getting the number of employees under control.
The consequences are already visible on the labor market. A number of high-profile layoff announcements in hospitality and retail in recent months have been explicitly attributed to the NIC rise, and recruitment activity has slowed as companies think twice before hiring new staff. Research from staffing firm Reed found that 46 percent of companies said the tax increase would impact their hiring decisions.
Kinzett-Evans added that the timing was particularly unfortunate as it came just as employers were preparing for the additional compliance costs enshrined in the Employment Rights Act. “It is now widely accepted that tax levels in the UK have become too high,” he said. “Companies need a sensible economic plan that provides for a reduction in the trade tax burden.”
With the Chancellor under increasing pressure from business groups to ease the pressure before the next financial event, the question of who will ultimately pay for the NIC increase, shareholders, employees or buyers, is fast becoming one of the crucial economic debates of the year.
