The latest data from The Global Payroll Association (GPA) shows that UK businesses paid £114bn in employer National Insurance Contributions (NICs) in 2024, the highest total in the past decade.
This follows an annual increase of 6.8 percent, marking the ninth consecutive rise since 2015. The figure is expected to grow further in 2025 due to changes outlined in Labour’s Autumn Budget.
GPA’s analysis of HMRC data indicates that total tax receipts in 2024 reached £849bn. PAYE income tax contributed £252bn, accounting for 29.7 percent of the total tax collected. This represents an 8.6 percent annual increase and the fourth consecutive year that PAYE receipts have risen. PAYE now accounts for 86.6 percent of all income tax revenue, up from 84.3 percent in 2021.
UK employees also paid £51bn in NICs last year, although this was 18.8 percent lower than the previous year. While employee contributions declined, the burden on businesses increased, with employer NICs continuing their upward trend.
Impact of Employer NIC Rate Increases
The employer NIC rate is set to rise from 13.8 percent to 15 percent in April 2025, adding further cost pressures on businesses.
Melanie Pizzey, CEO and Founder of the Global Payroll Association, said, “The government is collecting a huge amount of income tax from PAYE employees, with the totals increasing year on year since at least 2013, bar a small pandemic-induced dip in 2020.
“At the same time, the contributions owed by businesses on behalf of their PAYE employees are at their highest in the last decade and this is set to climb even further, due to Labour’s Autumn Budget announcement that employer NIC rates will increase from 13.8 percent to 15 percent as of April this year. The consequences of this increase are going to be profound as businesses see their staffing costs skyrocket.”
Pizzey highlighted that major UK companies, such as Sainsbury’s, have already introduced cost-cutting measures in response to rising staffing expenses. However, she added that small and medium-sized businesses (SMEs) are likely to be hit the hardest.
“The most damage is likely to be suffered by small and medium-sized operations, many of which are expected to buckle under the new financial pressures. This is going to lead to job cuts, cancelled pay rises, and will probably force many businesses to cease trading altogether,” she said.