Possible NI Hike May Hit IR35‑Aware Firms
In a nutshell: The upcoming Budget could raise the employers’ National Insurance (NI) rate—currently a modest 13.8%—which will rain on the heads of firms that mess up the off‑payroll working rules.
Background in Plain English
Off‑payroll rules: Since the latest legislation, companies (except the tiniest private‑sector outfits) that hire contractors must make sure they’re not slacking on employment taxes.
“Disguised employment”: This happens when a contractor who should be counted as inside IR35 is mistakenly treated as truly self‑employed.
Consequence: If HMRC flags a non‑compliant engagement, the party that pay the contract (the client or the agency) gets slapped with a bill covering the unpaid employer’s NI and other employment taxes they should have handed over.
What the Rumours Could Mean
Direct hit: A bump in NI spells a straightforward cost rise for businesses with payroll‑based staff.
Indirect fallout: More importantly, the penalty for anyone who slips up on the off‑payroll rules would be steeper. Imagine a plumber getting a huge tax bill for an incorrectly classified contractor—yikes!
Compliance becomes king: Firms find themselves more motivated than ever to keep their contractor bookkeeping squeaky clean.
Qdos CEO Says We’ve Got More to Watch
“A higher NI is a double‑whammy,” Seb Maley from Qdos explains. “Slack off and you’re not only paying more for every employee on the payroll—you’re also looking at huge penalties if HMRC decides the contract was mis‑classified.”
Paying the extra 13.8%: Many companies already tack this on when they wrongly put a self‑employed contractor straight onto the payroll.
The slide to employment contracts: Some firms, in a panic, hired everyone to stay shy of off‑payroll pitfalls. But that extra fee on each hire means the cost is ballooning with any NI increase.
Bottom Line
If NI rises, so do the tax blips you might get prodded for.
Stay tidy with IR35 classifications—you’ll save a bundle of money and avoid nasty surprises.
Think twice before packing every contractor into the payroll.
If you’re already paying extra on every marginal contractor, be prepared for an avalanche of new costs if the government nudges the NI rate higher.
Stay alert and keep your contractor roster compliant—you’ll thank yourself later.
