The Government has collected £28 billion in Employer National Insurance Contributions (NICs) in the year to 31 March 2026, exceeding its original forecast of £24 billion by £4 billion. The stronger-than-expected receipts follow sweeping changes introduced from 6 April 2025, which significantly increased the cost of employing staff across the UK.

The rise in receipts is largely the result of two major reforms announced in the Autumn Budget and implemented at the start of the 2025/26 tax year. First, the rate of employer Class 1 secondary National Insurance Contributions increased from 13.8% to 15%. Second, the threshold at which employers begin paying NICs on employee earnings was cut sharply from £9,100 to £5,000 annually. Together, these changes widened the taxable payroll base while increasing the tax rate applied to it.

While the Government had initially expected the reforms to generate approximately £24 billion in additional revenue, the £28 billion outturn suggests the policy has been even more lucrative than forecast. This could reflect stronger-than-expected wage growth, continued resilience in employment levels, and the fact that many businesses absorbed the higher costs rather than making immediate workforce reductions.

According to the UK Office for National Statistics, compulsory social contributions rose significantly during the period “as changes to the rate of National Insurance contributions paid by employers came into effect on 6 April 2025”. In its March 2026 public finances release, the ONS reported that these changes contributed to a £3.5 billion rise in compulsory social contributions in March alone.

For businesses, however, the picture is more complicated.

Higher employer NIC effectively increase the tax cost of hiring and retaining staff, particularly lower-paid workers who are now caught by the reduced threshold. Businesses in labour-intensive sectors such as hospitality, retail, care, logistics and manufacturing are likely to feel the greatest strain because payroll forms a high proportion of operating costs.

A hospitality business with 50 employees, for example, may now face tens of thousands of pounds in additional annual tax costs, even if wages remain unchanged. For firms already managing inflation, elevated borrowing costs and softer consumer demand, the extra payroll burden reduces margin flexibility.

The most immediate likely impact is slower hiring. Rather than cutting jobs outright, many employers may freeze recruitment, delay expansion plans or leave vacancies unfilled. This is particularly likely among small and medium-sized enterprises (SMEs), which often operate with less financial headroom than larger corporates.

There may also be knock-on effects on wage growth. As employer costs rise, businesses may become more cautious around pay increases, bonuses and headcount expansion. In practice, part of the tax rise may be passed back to employees through weaker salary growth over time.

Some firms are also expected to accelerate automation and restructuring strategies. Where technology can replace repetitive administrative or operational roles, the increased cost of labour strengthens the business case for investment in AI, self-service technology, workflow software and outsourced functions.

Another likely response is renewed interest in salary sacrifice arrangements, pension efficiency and employee benefits planning, as employers look for legitimate ways to reduce NIC liabilities. However, the Government has already shown an increasing willingness to review areas of tax leakage, meaning planning opportunities may narrow further in future budgets.

Critics argue the reforms risk undermining business confidence and economic growth. Some business owners have warned that the changes amount to a tax on jobs at a time when the UK needs stronger productivity and investment.

A Novuna analysis published following the policy change stated: “The upcoming rise in National Insurance Contributions is set to cost UK businesses an additional £28bn this year.” It also noted that average employer costs per worker had risen materially, especially for lower and middle earners.

Supporters of the policy argue that the revenue boost is necessary to stabilise public finances and fund higher spending commitments. With borrowing pressures still elevated, the stronger-than-forecast NIC receipts will likely be welcomed by the Treasury as evidence the measure is delivering beyond expectations.

However, the policy’s long-term success will depend on whether businesses continue hiring, investing and growing despite the added burden. If higher employment taxes gradually weaken recruitment, suppress wages or reduce competitiveness, the initial fiscal gain could come at a wider economic cost.

For now, the £28 billion figure demonstrates one clear outcome: employer NIC has become an even more significant revenue lever for the Government, and a more material cost line for British businesses.