London Daily

Focus on the big picture.
Monday, Dec 29, 2025

National insurance rise forces UK employers to shoulder £9bn tax burden

National insurance rise forces UK employers to shoulder £9bn tax burden

Bosses say 1.25-point rise heaps pressure on firms already enduring soaring costs linked to Covid and Brexit

Britain’s employers are being forced to shoulder a £9bn tax rise after the government pushed ahead with raising national insurance on Wednesday despite stiff opposition.

Company bosses said the 1.25-percentage-point rise in national insurance contributions (NICs), which is paid by workers and their employers, would add to already severe pressure from runaway inflation and soaring business costs this year linked to Covid, Brexit and Russia’s war in Ukraine.

“[The] national insurance rise piles another cost pressure on top of firms at a time when they can ill afford to bear it,” said Shevaun Haviland, the director general of the British Chambers of Commerce.

“Members are telling us that energy bills are soaring while the price of raw materials are reaching levels many have never encountered before. This comes alongside vastly increased shipping costs and a squeezed labour market.”


According to Treasury figures released in response to a parliamentary question from Labour, the portion paid by employers is to raise £8.8bn for the exchequer in the current financial year.

The brunt of the rise will be borne by key sectors including manufacturing, which is facing extra taxes worth £900m. Employers in the health and social care sector will be taxed £1bn extra, while those in the wholesale and retail trade will face a similar increase and the construction industry will be landed with a bill worth £400m.

Jonathan Reynolds, the shadow business secretary, said the figures showed the government was not on the side of employers. “The Conservatives’ decision to hike taxes during a cost of living crisis will make things even harder for businesses and families,” he said.

Reynolds said Labour would instead have launched a one-off windfall tax on profits made by oil and gas producers amid the surge in energy prices, which would be used to help small firms with tax cuts and support for energy intensive industries such as ceramics.

With inflation at the highest rate since at least the early 1990s, the government has faced heavy criticism from across the political spectrum for pushing ahead with the manifesto-busting NICs rise

Designed to raise billions of pounds to fund health and social care, the move has prompted questions about the timing, amid Britain’s worsening cost of living crisis, with critics arguing that other options could have been pursued to raise the money.

Defending the plan on Wednesday, Boris Johnson said he had “absolutely no problem” with the increase because it was “unquestionably the right thing for our country” as the health service faced growing demand and grappled with a backlog built up during the pandemic.

However, employers groups said it would inflict pain for businesses struggling to recover from the Covid shock to the economy.

Martin McTague, the national chair of the Federation of Small Businesses, said it was a “jobs tax hike” that would hurt workers and employers. “The small business tax burden is now at its greatest since the 1950s – a development which couldn’t have come at a worse time, with spiralling energy costs, input cost inflation, supply chain disruption and Covid-related staff absence all taking their toll,” he said.

Research from the manufacturers’ trade group Make UK shows as many as 60% of industrial firms believe the rise will have a moderate or significant impact on their recruitment plans, while almost three-quarters say it will add to inflationary pressures that will be passed on to consumers.

“The NICs increase is just one of many significant costs facing UK manufacturers and there will be a big question as to whether the UK is a competitive place to do business right now,” a spokesperson for the group said.

The Treasury said it was supporting workers and businesses with rising costs, including a tax cut worth £1,000 for half a million small firms by increasing the employment allowance – a tax break on wage bills – starting from Wednesday.

The chancellor, Rishi Sunak, used his spring statement last month to offset some of the impact of rising inflation, including an increase in the threshold at which workers begin to pay national insurance from £9,880 to £12,570 that comes into effect from July.

On top of a package of energy support including a council tax rebate and loan scheme announced in February, Sunak announced a 5p cut to fuel duty rates, a £500m increase in a household support fund and pledged a 1p cut in the basic rate of income tax in two years’ time.

However, only £1 in every £3 of the measures announced by the chancellor will go to the poorest half of people in Britain, according to the Resolution Foundation. The Institute for Fiscal Studies estimates the national insurance rise will rake in about £17.2bn in total for the exchequer from workers and employers, far more than the £6.3bn cut for workers benefiting from the threshold change.

A government spokesperson said it was supporting employers and workers. “No government can control the global factors pushing up prices, but we will act where we can to support businesses,” they added.

Newsletter

Related Articles

0:00
0:00
Close
UK Plans Royal Diplomacy with King Charles and Prince William to Reinvigorate Trade Talks with US
King Charles and Prince William Poised for Separate 2026 US Visits to Reinforce UK-US Trade and Diplomatic Ties
Apple Moves to Appeal UK Ruling Ordering £1.5 Billion in Customer Overcharge Damages
King Charles’s 2025 Christmas Message Tops UK Television Ratings on Christmas Day
The Battle Over the Internet Explodes: The United States Bars European Officials and Ignites a Diplomatic Crisis
Princesses Beatrice and Eugenie Join Royal Family at Sandringham Christmas Service
Fine Wine Investors Find Little Cheer in Third Year of Falls
UK Mortgage Rates Edge Lower as Bank of England Base Rate Cut Filters Through Lending Market
U.S. Supermarket Gives Customers Free Groceries for Christmas After Computer Glitch
Air India ‘Finds’ a Plane That Vanished 13 Years Ago
Caviar and Foie Gras? China Is Becoming a Luxury Food Powerhouse
Hong Kong Climbs to Second Globally in 2025 Tourism Rankings Behind Bangkok
From Sunniest Year on Record to Terror Plots and Sports Triumphs: The UK’s Defining Stories of 2025
Greta Thunberg Released on Bail After Arrest at London Pro-Palestinian Demonstration
Banksy Unveils New Winter Mural in London Amid Festive Season Excitement
UK Households Face Rising Financial Strain as Tax Increases Bite and Growth Loses Momentum
UK Government Approves Universal Studios Theme Park in Bedford Poised to Rival Disneyland Paris
UK Gambling Shares Slide as Traders Respond to Steep Tax Rises and Sector Uncertainty
Starmer and Trump Coordinate on Ukraine Peace Efforts in Latest Diplomatic Call
The Pilot Barricaded Himself in the Cockpit and Refused to Take Off: "We Are Not Leaving Until I Receive My Salary"
UK Fashion Label LK Bennett Pursues Accelerated Sale Amid Financial Struggles
U.S. Government Warns UK Over Free Speech in Pro-Life Campaigner Prosecution
Newly Released Files Shed Light on Jeffrey Epstein’s Extensive Links to the United Kingdom
Prince William and Prince George Volunteer Together at UK Homelessness Charity
UK Police Arrest Protesters Chanting ‘Globalise the Intifada’ as Authorities Recalibrate Free Speech Enforcement
Scambodia: The World Owes Thailand’s Military a Profound Debt of Gratitude
Women in Partial Nudity — and Bill Clinton in a Dress and Heels: The Images Revealed in the “Epstein Files”
US Envoy Witkoff to Convene Security Advisers from Ukraine, UK, France and Germany in Miami as Peace Efforts Intensify
UK Retailers Report Sharp Pre-Christmas Sales Decline and Weak Outlook, CBI Survey Shows
UK Government Rejects Use of Frozen Russian Assets to Fund Aid for Ukraine
UK Financial Conduct Authority Opens Formal Investigation into WH Smith After Accounting Errors
UK Issues Final Ultimatum to Roman Abramovich Over £2.5bn Chelsea Sale Funds for Ukraine
Rare Pink Fog Sweeps Across Parts of the UK as Met Office Warns of Poor Visibility
UK Police Pledge ‘More Assertive’ Enforcement to Tackle Antisemitism at Protests
UK Police Warn They Will Arrest Protesters Chanting ‘Globalise the Intifada’
Trump Files $10 Billion Defamation Lawsuit Against BBC as Broadcaster Pledges Legal Defence
UK Says U.S. Tech Deal Talks Still Active Despite Washington’s Suspension of Prosperity Pact
UK Mortgage Rules to Give Greater Flexibility to Borrowers With Irregular Incomes
UK Treasury Moves to Position Britain as Leading Global Hub for Crypto Firms
U.S. Freezes £31 Billion Tech Prosperity Deal With Britain Amid Trade Dispute
Prince Harry and Meghan’s Potential UK Return Gains New Momentum Amid Security Review and Royal Dialogue
Zelensky Opens High-Stakes Peace Talks in Berlin with Trump Envoy and European Leaders
Historical Reflections on Press Freedom Emerge Amid Debate Over Trump’s Media Policies
UK Boosts Protection for Jewish Communities After Sydney Hanukkah Attack
UK Government Declines to Comment After ICC Prosecutor Alleges Britain Threatened to Defund Court Over Israel Arrest Warrant
Apple Shutters All Retail Stores in the United Kingdom Under New National COVID-19 Lockdown
US–UK Technology Partnership Strains as Key Trade Disagreements Emerge
UK Police Confirm No Further Action Over Allegation That Andrew Asked Bodyguard to Investigate Virginia Giuffre
Giuffre Family Expresses Deep Disappointment as UK Police Decline New Inquiry Into Andrew Mountbatten-Windsor Claims
Transatlantic Trade Ambitions Hit a Snag as UK–US Deal Faces Emerging Challenges
×