As of April 2025, employer National Insurance Contributions (NICs) have officially risen from 13.8% to 15% on salaries above £5,000, following the announcement in the October 2024 budget.

While this increase might seem minor at first glance, it poses a significant financial strain for businesses—particularly those employing large numbers of staff on lower wages.

If your business is already feeling the pinch of cash flow challenges, this added burden may leave you wondering how to absorb the extra costs. But before considering drastic measures like shutting down, there are several practical steps you can take to adjust to these financial pressures.

1. Review Your Business Costs

The first step is to conduct a thorough financial review. Identify areas where you can reduce unnecessary expenses without sacrificing efficiency. Could you negotiate better rates with suppliers? Can you cut back on discretionary spending? Incremental savings across multiple areas can ease the pressure of higher NICs.

2. Restructuring

If cash flow issues are becoming a serious concern, a business restructure might be the best option. Restructuring is not about closing down—it’s about reshaping your business to operate more efficiently. This could involve streamlining operations, renegotiating contracts, or consolidating debts into more manageable payments.

At Parker Walsh, we offer tailored restructuring solutions to help businesses stabilise their finances and avoid insolvency.

3. Company Voluntary Arrangement (CVA)

A CVA is a powerful tool for businesses struggling with debts but determined to continue trading. It allows you to negotiate new repayment terms with your creditors, making monthly payments more manageable. Freeing up cash flow in this way can help absorb the NIC increase without putting your business at risk.

If you’re struggling to pay suppliers, HMRC, or other creditors, a CVA could help you get back on track.

4. Administration

For businesses experiencing more severe financial strain, entering administration could provide a solution. This formal process offers protection from creditor action while a recovery plan is developed.

Many businesses that go through administration emerge with a leaner structure and a more sustainable future.

5. Members’ Voluntary Liquidation (MVL)

If you’ve been thinking about retiring or closing your business, now could be the time to consider a Members’ Voluntary Liquidation (MVL). This is a tax-efficient way to close a solvent company and distribute its assets among shareholders.

With rising NICs and ongoing economic pressures, some business owners may find it financially beneficial to step away now rather than continue absorbing increasing operational costs.

6. Creditors’ Voluntary Liquidation (CVL)

If your business is no longer viable and cannot meet its financial obligations, a Creditors’ Voluntary Liquidation (CVL) may be the right course of action. This formal insolvency process allows you to close your company in an orderly way while protecting yourself from personal liability.

7. Seek Professional Advice Early

The most important step is to seek advice as early as possible. Many businesses face financial difficulties, and early intervention can provide you with more options for recovery. Whether you need support with restructuring, negotiating with creditors, or exploring formal insolvency solutions, Parker Walsh is here to guide you through the process.

Conclusion

The rise in employer NICs adds another layer of pressure for businesses already grappling with increasing costs. However, there are many ways to adapt and stay afloat. From cost reviews and restructuring to formal processes like CVAs or administration, you have options beyond simply closing your doors.

If you’re concerned about how the NIC increase is affecting your business, speak to Parker Walsh today. Acting now could make all the difference in securing a sustainable future for your company.

_{Photo by Artem Podrez}