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Budget: How the NIC increase may impact you

So, it’s arrived. The budget we’ve all been patiently (and slightly anxiously) waiting for.

If you’re a business owner, you might have some mixed opinions. We’ve already spoken to a number of our clients, and there are plenty of thoughts flying around as we all try to make sense of what it means long-term.

A common talking point was the increase in employer national insurance contributions (NIC), and its impact on contractors on Inside IR35 contracts, especially those engaged via Umbrella Companies.

Here’s a brief explainer.

What is it?

From 6th April 2025 the employer national insurance will rise from 13.8% to 15%.

This will help the government raise funds for more spending, and to reduce debt, but will also hit the pockets of both employers and contractors – especially if you’re inside of IR35.

However, we believe that the lowering of the threshold from £9100 to £5000 has a greater effect on payable tax than the headline rate increase from 13.8% to 15%.

Whether you’re a contractor, or an employer using contractors, this change is worth some attention, as it will likely impact you.

Why it matters

If the end client adds a percentage to cover so-called ‘employer costs’, of which the major cost will be Employer NICs, then you won’t notice any difference as they should increase this contribution.

If you have only agreed on an umbrella rate, then your umbrella company will need to increase the Employer NIC deduction and you will see a decrease in your take-home pay.

Because an Inside IR35 determination has been made by the end client, they are effectively saying the contractor is an employee and not a consultant.

Morally, the burden of the increase in employers’ NICs should fall with the end client – meaning a rate increase should be given to cover this.

Talk to an expert

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But importantly, we’re there to offer consultancy for all our clients and provide expert support in times of change.

Got a question, or think we might be able to work together? Please get in touch.