Wbg, one of Scotland’s leading independent specialist full-service accountancy firms, has warned that upcoming budget changes may deliver a harsh blow to employers, with implications that could shake the foundations of many industries.
The Employer National Insurance Contributions (NIC) rate, currently at 13.8%, is set to rise to 15% in April 2025. Craig Allison, Associate Director in Wbg’s insolvency team, highlighted that while this 1.2% increase might seem modest, the impact is intensified by a drastic reduction in the NIC threshold—from £9,100 down to £5,000.
“This shift will unleash an avalanche of costs onto employers, especially for those whose workforce falls in lower income brackets,” he said. “Consider the figures: companies will soon be paying 50% more annually in NICs for employees earning £20,000.
“This punishing increase will hit hardest in sectors where wages tend to be lower, like hospitality, an industry already crippled by the aftermath of COVID-19. In this sector, where average salaries are below the national mean, costs will potentially skyrocket."
To illustrate, Mr. Allison provided an example of a hotel with 30 employees split across three salary bands. For two employees earning £60,000 per annum, the NIC burden will climb by £2,452 annually. For three earning £40,000, the increase is £2,958. But the real shock comes with lower-income staff: 25 employees earning £20,000 will drive up the business’s NIC costs by a staggering £18,650.
“In total, this hotel will be faced with a hefty £24,060 increase—potentially enough to destabilise a business already on the verge of financial difficulty,” he said.
“Many industries are just starting to regain their footing post-pandemic, and these additional costs could mean the difference between survival and insolvency. Unfortunately, the more employees you have, the more impact these changes are likely to have.
“If you are alarmed by the scale of these changes and their potential impact, don’t wait - seek guidance now.”
Wbg has extensive experience assisting businesses in financial distress and offers a no-commitment confidential consultation.
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