NI Increases Hit Contractor‑Banning Firms the Hardest

NI Hike: Why the Payroll Push‑in Is Bursting Back‑Tons for Companies

Remember the “off‑payroll” saga that made NGOs and banks pull in gig workers? The Employers’ National Insurance rate jump is finally making those knee‑jerk responses feel like a tax‑fuelled treadmill.

What’s Changed?

Employers’ NI leapt from 13.8 % to 15 % on 6 April 2025.
The salary threshold that triggers the levy dipped from £9,100 to £5,000.
Every payroll payment now carries a higher tax sticker.

Why It Cuts Deep into the wallet

Qdos’s Seb Maley calls the new rates a “catalyst for a rethink.” Why? Because dozens of firms, tired of IR35 black‑box filings, went full‑scale contractor bans – moving all freelancers onto payroll via umbrella companies, no matter if they’re actually employees. The result? A massive payroll‑budget explosion.

A Quick Recap of IR35 Upgrades

2017: Public sector shifts IR35 responsibility to businesses.
2021: Private sector follows suit, taking the tax on for “inside IR35” workers.
Wrong classification moves the tax burden from the contractor to the client.

Cost Shock: From 13.8 % to 15 % – The Payroll Pulse Falls

“We’ve been paying a heavy 13.8 % extra on every genuine self‑employed worker that got shoved onto the payroll,” Maley said. “Now, that spike hits a new height, and the cost of those blanket bans is soaring.” He urged firms to abandon the cheating‑the‑rules wrap-up in favour of authentic offshore contractor status where it actually belongs.

Possible Faux‑Employment Scene

Lawmakers warned that this new expense could drive some firms to adopt “false self‑employment” to avoid the audit. For those doing proper IR35 checks, the pay‑roll upgrade actually boosts the incentive to keep contractors truly independent, saving money.

What Should Companies Do?

Audit their current contractor payroll for IR35 compliance.
Stop blanket bans – they only eat into costs.
Use reliable guidance (like KPMG or the Treasury) to set the correct employment status.