Wbg, one of Scotland’s leading independent specialist full-service accountancy firms, has warned that budget changes are setting the stage for a harsh blow to employers, with implications that could shake the foundations of many industries.

With the current Employer National Insurance Contributions (NIC) rate of 13.8% set to rise to 15% in April 2025, Craig Allison, associate director in Wbg’s insolvency team, said that while this 1.2% increase may sound modest, the impact is hidden in a drastic reduction of the NIC threshold—from £9,100 to a mere £5,000.

“This shift will unleash an avalanche of costs onto employers, especially for those whose workforce falls in lower income brackets,” he said.

“Consider the figures: companies will soon be paying a chilling 50% more each year in NICs for employees earning £20,000.

“This punishing increase will hit hardest in sectors where wages tend to be lower, like hospitality, an industry already crippled by the aftermath of COVID-19. Here, where average salaries are below the national mean, the costs will potentially skyrocket.”

To illustrate, Mr Allison cites an example of a hotel with 30 employees split across three salary bands. For two employees making £60,000 per annum, the NIC burden will climb by £2,452 annually. For three earning £40,000, the increase is £2,958. But the real shock comes with lower-income staff: 25 employees earning £20,000 will drive up the business’s NIC costs by a staggering £18,650.

“In total, this hotel will be faced with a hefty £24,060 increase—potentially enough to destabilise a business already on the verge of financial difficulty,” he said.

“Many industries are just starting to regain their footing post-pandemic, and these additional costs could mean the difference between survival and insolvency. Unfortunately, the more employees you have, the more impact these changes are likely to have.

“If you are alarmed by the scale of these changes and their potential impact, don’t wait—seek guidance now.”

Wbg has extensive experience of dealing with businesses in financial distress and offers a free, initial, confidential consultation.

ENDS

For further information please contact Craig Allison on 0141 566 7000

Issued on behalf of Wbg by Liquorice Media tel 0141 332 4935 www.liquorice-media.com

Date: 13 Nov24