By Angela Kunawicz | 23rd January 2025

National Insurance Changes? Here’s How SMEs Can Adapt

RECENT changes to Employers’ National Insurance (NI) contributions have sparked debate among the UK’s business sectors. With a 1.2 per cent increase in the NI rate and a lower contribution threshold, small and medium-sized enterprises (SMEs) will face a raft of challenges. As an established SME ourselves, Blueberry shares the same difficulties you face in navigating rising costs while safeguarding our team and clients. While these changes are part of a wider economic strategy, they will undoubtedly stretch businesses already grappling with tight margins and rising costs.

This article offers advice to help SMEs tackle challenges, with tips on pricing strategies, communication, and available business support. And find out how changes will affect employer contributions, thresholds and allowances in our table below.

The Balancing Act – What Can Your SME Do?

With recent increases in National Insurance contributions, SMEs face rising operational costs that require careful planning and adaptation. In a recent LinkedIn post, Financial Strategist and SME Business Owner Justin Turner calculates that for a 10-strong team, the additional costs could rise by more than £2,200 per year, even accounting for the new allowance. This is based on a full-time staff member working seven hours per day on minimum wage (as of April 2025).

Apply this to a company of 50 employees; the rise could be more than £33,170 per year. This poses a threat to many SMEs where even the slightest adjustments in mandatory expenses can disrupt finely tuned budgets and lead to tough financial decisions.

Justin added: “Making more money boils down to three strategies: raise prices, cut costs, or increase sales. The numbers tell a story – one that we can manage with a bit of strategy.”

Sure, these changes bring challenges, but they also bring opportunities for innovation and resilience. The key to successfully navigating these adjustments lies in balancing cost management with maintaining strong client relationships and a motivated team.

Price Adjustments & Transparent Communication

It will be necessary for many SMEs to pass some of the cost onto their clients. If this is the case, being upfront with your employees and clients is important. Transparent communication about these changes can promote understanding, trust and loyalty. Justify the cost increases by emphasising how they will allow you to maintain the high quality of your products or services. Consider implementing gradual price adjustments and incrementally increasing prices over time to avoid upsetting loyal customers.

“The increase in the employer NI contributions will hit many,” said Alan Lowry of the Federation of Small Businesses (FSB) in Northern Ireland. He praised Chancellor Rachel Reeves’s decision to increase the Employment Allowance (EA) for small businesses, saying: “The uplift in this allowance is very welcome, as it more than doubles from £5,000 to £10,500, which will shield the smallest employers from the jobs tax and is, therefore, a pro-jobs prioritisation in a tough Budget.

A mixed race lady in an orange tshirt and green apron and a black man in a white tshirt and green apron sat side by side in a pottery studio spinning clay on a wheel and smiling.

Tapping into Local Networks & Business Support

“We’re preparing for the changes by streamlining our workflows and looking at more cost-efficient processes,” said Blueberry Director Pamela Welsh. “Change is inevitable, but how you respond to it can make all the difference. To ease the impact, it’s worth looking into publicly funded programmes and local business support available in your area. Not only have we promoted these transformative initiatives for our public sector clients, but we have also participated in them and experienced their benefits firsthand. They’ve made a real difference for us, so we strongly encourage others to explore them!”

Funded Business Support available:

Here’s a breakdown of some of the places you can turn to for help:

Why not join your local Chamber of Commerce to access expert advice, essential services, and a thriving community of like-minded businesses to share insights and opportunities which will help you expand your network, grow your presence, and drive success? Innovate UK offers funding and collaboration opportunities to turn new ideas into reality, whilst R&D Tax Credits can help you claim back costs associated with innovative projects.

Your Local Growth Hub can link you to tailored business advice and support across England, providing practical tools to boost productivity. From identifying cost-saving strategies to improving efficiency, these hubs can connect you to local fundings opportunities, training and networking programmes.

The Government’s Help to Grow Management initiative offers management and leadership training for businesses looking to accelerate their growth. A recent impact evaluation shows that 74 per cent of participants reported increased resilience, and 91 per cent are more knowledgeable on factors that drive business productivity.

Need extra funds to level up your business? The Northern Powerhouse Investment Fund II (NPIF) offers financing to North of England entrepreneurs, start-ups, and SMEs ranging from £25k to £2m. Leveraging some of these resources, means your business can remain competitive, productive, and resilient, despite the upcoming National Insurance changes.

A Pragmatic Perspective

SMEs can navigate rising costs, while continuing to look after their stakeholders. You may adjust your prices, share your business plans with your staff or consider wider business support on offer. It’s about finding a balance that allows your business to prosper while maintaining solid relationships with your team and clients.

Feel free to get in touch for any guidance on how we can help you meet your business growth objectives. Visit blueberryms.co.uk, email info@blueberryms.co.uk, or call 0113 4877013.

Please note, we are not financial or business advisors. The information provided here is intended as general guidance to support SMEs in exploring available options. For tailored advice specific to your business needs, we recommend consulting a qualified professional.

[COPYRIGHT © 2025 ANGELA KUNAWICZ & BLUEBERRY MARKETING SOLUTIONS. ALL RIGHTS RESERVED.]

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The Facts:

From April 2025, SMEs will have to contribute more to their employees’ NI. The lower threshold means that more of their employees’ earnings will be subject to NI.

  • Higher Employer NI Contributions (NICS): The rate rises from 13.8% to 15% for eligible earnings above £175 a week.
  • Lower Contribution Secondary Threshold (ST): Businesses will pay NI on salaries above £5,000 annually, dropping from £9,100. Then, increase in line with the Consumer Price Index (CPI) from 2028-29.
  • Increased Employment Allowance (EA): The allowance rises from £5,000 to £10,500, reducing NI liabilities for some SMEs.
  • Removing the Employment Allowance (EA) cap: Employers with NIC liabilities over £100,000 in the previous tax year (but which are in other respects eligible) can claim the full £10,500 EA.

The net revenue raised by these changes is predicted to be just under £24bn in 2025-26, rising to around £26bn in 2029-30.

Written by By Angela Kunawicz

Contact

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info@blueberryms.co.uk

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