The impact of the UK’s National Insurance rate hike and drop in where it kicks in - higher local authority rates and more expensive health care

Here is how Brave AI describes the hike in National Insurance rates for the UK.

“In 2025, the UK's National Insurance (NI) rates for employers will increase from 13.8% to 15%. Additionally, the threshold at which employers become liable to pay secondary Class 1 National Insurance contributions will decrease from £9,100 to £5,000 per year. These changes will take effect from 6 April 2025.”

“The total receipts from National Insurance in the UK amounted to over £177.74 billion in the fiscal year 2023/24. This figure represents a slight increase from the previous year, which saw receipts of £177.44 billion,”

On the face of it, a 1,2% increase in the rate from 13.8% to 15% will only raise a little over 2 billion pounds. No big deal, right?

Well, the kicker is the decrease in the threshold at which National Insurance (NI) kicks in.

Dropping the level at which NI kicks in from £9,100 to £5,000 means that there will be additional NI contributions of 15% on £4,100 for every employed person in the country.

From Brave AI:

“As of October 2024, the number of people employed in the United Kingdom was approximately 33,770,000.”

The extra NI contributions = 33.77 million times 15% times £4,100

That works out at just over £20.75 billion pounds plus the £2 billion = around £23 billion A YEAR.

Straight off the bottom line of the country.

Employers must also contend with this (from Brave AU):

“The UK minimum wage increased in April 2025. The National Living Wage for those aged 23 and over increased to £12.21 from £11.44, a rise of £0.77.”

“As of April 2024, the number of jobs paid up to 5p above the minimum wage is estimated to rise from 1.6 million in 2023 to around 2 million.”

This article is not so much about the minimum wage as it is about the cost to employers of the NI increase of 15% of £4,100 = £615 per employee.

This is a tax increase on employment.

One of the largest employers in the UK is the public sector.

Per Brave AI:

“As of the third quarter of 2024, there were approximately 6.1 million people employed in the public sector in the United Kingdom. This number represents a slight increase from the previous quarter and the previous year, with the March 2024 level being the highest since March 2012.

So, the UK Labour government has increased the taxes and costs of running the country by, sat, 6 million times 15% times £4,100 = around £3.7 billion.

It’s not just the increase in the cost of employment that is hitting the private and public sectors.

Leaving aside the bankrupt local authorities that have will break the maximum permitted 5% local tax increase (rates) described here:

Millions face higher council tax bills as government approves increases above threshold | ITV News

Local authorities also incur the rise in NI:

Councils facing £100m cost to cover National Insurance hike, Cosla warns - BBC News

“Councils have warned they will have to make "difficult decisions" to cover a £100m funding gap arising from the UK-wide increase in employer National Insurance.”

From Brave AI, just for England - not Wales, Scotland and Northern Ireland:

“a significant reduction, with the permanent employee headcount falling by 23%, from 1,380,000 to 1,057,800.6 This figure represents the number of people employed in local authorities in England…”

How about the National Health Service?

Per Brave AI:

“The NHS across the UK as a whole employs about 1.5 million personnel, making it one of the world's largest employers.”

1.5 million people at £615 each = an extra £922 million pounds.

Which works out at an extra £650 million - not the £100 million in the BBC article - and that is before taking into account part-time employees!

Per Brave AI:

“The total non-domestic rates collected by local authorities in England for the financial year 2023 to 2024 were £23.7 billion, and they estimate the non-domestic rating income for 2024-25 will be £26.3 billion.”

Which means the NI tax increase is around 2.5 per cent of the total rates bill for England.

Walks like a tax increase, talks like a tax increase and is, in fact, a tax increase.

Most local councils will use this as an excuse to impose the maximum rate increase (local authority tax) of 5% - wait for the energy companies to do the same.

In fact, every company will do the same.

It will add directly to inflation, upstream and downstream. It will be a miracle if the UK avoids the stagflation of negative economic growth and higher prices.

Just wait, there will be an increase in the transaction tac called Value Added Tax (VAT) - to plug another black hole!

Onwards!!!