British businesses are grappling with a historic rise in payroll costs, as new figures from HM Revenue & Customs reveal that national insurance contributions (NICs) have surged nearly 40 per cent in just six years. Between 2019-20 and the year ending February 2026, NIC receipts climbed from £143 billion to £198 billion, an increase of £55 billion largely drawn from employer payrolls.
The sharpest rise came over the past year, with contributions jumping 15 per cent following changes introduced in April 2025. These measures included lowering the earnings threshold at which NICs apply to £5,000 and raising the main employer rate to 15 per cent. The government has said the changes were designed to strengthen the social security system, but critics argue the cost falls heavily on businesses.
Robert Salter, a director at accountancy firm Blick Rothenberg, said higher employer NICs effectively act as a tax on employment. “Increasing social security costs tends to suppress hiring and adds to inflation pressures for consumers,” he said, noting that rising joblessness over the past year mirrors these trends.
Employers face additional financial pressures. From April 2026, the national minimum wage rose by 4.1 per cent, following a 6.7 per cent increase the previous year. Business rates also climbed for restaurants and clubs, though pubs were partially protected by the government.
The overall tax environment in the UK shows little sign of relief. The Office for Budget Responsibility projects that the total tax burden will reach 38.5 per cent of GDP by 2030-31, a postwar high. Income tax receipts have risen even more steeply than NICs, increasing by 69 per cent to £328 billion since the pandemic began.
Policy measures such as frozen tax thresholds, first introduced by former Prime Minister Rishi Sunak in 2021 and extended under Chancellor Rachel Reeves, have brought millions of earners into higher brackets. Analysts warn this fiscal drag will rank among the largest effective tax increases on individuals in recent UK history.
On top of these domestic pressures, global energy costs are rising. The ongoing conflict in the Middle East has driven oil and gas prices higher, pushing input costs for manufacturers. Industry surveys released last week showed cost inflation in the sector accelerating at the fastest pace since 1992.
For businesses already contending with higher wages, steeper NICs, and rising energy bills, the cumulative burden raises concerns over the government’s ability to foster private-sector growth. Some economists argue that without relief, smaller employers may struggle to expand, and consumer prices could rise further as companies pass on higher costs.
The HMRC data highlights the scale of fiscal pressures facing the UK economy and underlines the challenge for policymakers seeking to balance public finances with support for business recovery and employment.
