British employers have absorbed a £28bn rise in National Insurance Contributions over the past year, a significantly larger increase than originally forecast by the Treasury, according to new analysis from accountancy firm UHY Hacker Young. The findings have intensified concerns that higher payroll taxes are already feeding through into job losses across retail, hospitality and other labour-intensive industries.
The data shows total employer National Insurance payments increased by 24% in the 12 months to 31 March 2026, rising from £116bn to £143.9bn. The jump follows the government’s decision to increase the main rate of employer contributions from 13.8% to 15% from April last year. The policy was introduced as part of efforts to strengthen public finances but has since been criticised by business groups as an indirect tax on employment.
Phil Kinzett-Evans, a partner at UHY Hacker Young, said the scale of the increase had exceeded expectations and was placing real strain on companies. He said many firms had not been adequately prepared for the full impact of the change, adding that the cost pressure was now feeding into wider business decisions on staffing and investment.
The public sector has been partially shielded from the impact, with around £5bn allocated to offset additional costs, including a separate £515m set aside for local authorities. However, private sector employers have had to absorb the rise directly, forcing many to either raise prices or reduce staffing levels.
Early signs of labour market adjustment are already visible. Several redundancy programmes in retail and hospitality have been linked to rising employment taxes, while hiring activity has slowed as firms become more cautious about expanding their workforce. Recruitment data from Reed indicates that 46% of businesses expect the NIC increase to influence their hiring plans.
Businesses are also preparing for additional regulatory costs linked to upcoming employment legislation, further increasing concerns about overall labour expenses. Industry representatives argue that the combined burden of taxation and compliance requirements is reducing competitiveness and discouraging job creation.
Kinzett-Evans said the broader tax environment was becoming increasingly challenging for employers. He noted that many firms were calling for a clearer long-term strategy to ease pressure on business taxation and support hiring.
With the next fiscal statement approaching, pressure is building on the Chancellor to reassess the policy direction. Business leaders say the central concern now is how the additional costs are ultimately distributed, whether absorbed by companies, passed on to consumers, or reflected in reduced employment opportunities.
