How can I minimise the employer’s national insurance rises in my business?

Businesses have now had several months to see the effect of the employers’ NICs double hit on their bottom line. Now is a good time to explore how to mitigate that extra cost without damaging growth.  

What can I do to mitigate my NICs liability as an employer?  

There are several ways to help mitigate an increased employers’ NICs liability.  

• Prepare cashflow forecasts and budgets to reflect the increased costs, and identify pinch points.  
• Check eligibility for Employment Allowance.  
• Staff costs – look again at any proposed wage increases and the business’ ability to offer bonuses or promotions.  
• Customer prices – would your customer base accept price increases?  
• Activity mix – are there more profitable parts of your business that you could focus on growing? You might also consider reducing less profitable activities.  
• Reduced margin – can the business absorb a lower profit margin?  

For a quick and high level look at how the NICs increase affects your business, you can use TaxAssist Accountants’ NICs calculator here.   

Speak to our team at TaxAssist Accountants today to see how we can help your business to thrive despite the NICs increase. We can help you prepare cashflow forecasts, budgets and offer some practical advice. 

Is my business eligible for Employment Allowance?  

Employment Allowance is a reduction to the employers’ NICs bill of a business by up to £10,500 (for tax year 2025/2026).  

Check if you are eligible for Employment Allowance here. If you qualify, you can claim it through your payroll software. If you have fewer than ten employees, use the HMRC Basic PAYE tools.  

What is salary sacrifice?  

Salary sacrifice lets employees lower their pay by a set amount. The employer then uses this amount to give them a benefit.  

How does salary sacrifice help companies to save NICs?  

Salary sacrifice lowers employees' salaries. This means both the employee and employer pay less National Insurance Contributions (NICs).  

Employees already receive tax relief on pension contributions, but for other kinds of salary sacrifice arrangements, the employee may save income tax as well.  

How does a salary sacrifice for pensions work?  

Under a standard workplace pension arrangement, the employee and employer each agree to contribute a percentage of the employee’s pay into a pension. The employee can then draw from this or acquire an annuity with the funds when they retire. The employer puts the employee’s contribution into the pension scheme from the employee’s pay along with its own contribution.  

The pension contribution receives tax relief either through ‘relief at source’ or a ‘net pay arrangement’.  

Under salary sacrifice, the employee agrees to take a cut in salary equal to their current pension contribution. The employer then increases its contribution so that it is equal to the previous combined employee and employer total. As the employee’s salary is reduced, they pay less NICs and the employer pays less NICs too.  

What about other kinds of salary sacrifice?  

The following benefits can be offered with tax or NICs savings to be made:  

• pensions advice  
• on-site workplace nurseries  
• childcare vouchers (only if started on or before 4 October 2018)  
• cycle to work   
• electric vehicles 

What traps do employers need to be aware of with salary sacrifice?  

Setting up a salary sacrifice scheme is complicated. It is important to get professional advice. This scheme involves tax, HR, communication, and legal knowledge. Employment contracts need to be changed. Employers should provide clear guidance to employees. They must also avoid breaking National Minimum Wage or National Living Wage rules.  

Employers should inform employees that their reduced salary could affect mortgage or credit applications or welfare benefits calculations. Employees must ensure they do not use childcare vouchers and tax-free childcare at the same time.  

Government advice is available here.   

What happens if the Government stop allowing businesses to use salary sacrifice?  

In the past, a large list of salary sacrifice schemes existed, but over time, HMRC reduced the number of different benefits that employers can provide tax efficiently. Some salary sacrifice schemes e.g. childcare vouchers, have remained open for existing users only, whilst other schemes e.g. car parking, had to be closed by employers for new and existing users.  

There are news stories in the media suggesting the Government may reduce the availability of salary sacrifice schemes again, following the publication of a report by HMRC into the possibility of reducing the tax and NICs benefits. However, the Government has not announced any current plans to cancel salary sacrifice arrangements.  

TaxAssist Accountants can advise you on any changes to these rules and ensure you are up to date and compliant.   

Last updated 9 Jul 2025 | First published 9 Jul 2025

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This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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