How National Insurance Increases Affect Family Firms

The 2024 UK Budget has introduced significant changes to National Insurance (NI) contributions that will impact family business owners. With increased NI rates scheduled to take effect in April 2025, understanding the implications for both personal finances and business operations is essential.

Here’s a breakdown of what family business owners need to consider and some practical steps to help minimise the potential impacts on their business.

Key Implications Of The NI Increase

• Employer contributions: Family businesses will face higher operating costs due to increased NI rates, especially if they employ a substantial workforce.
  

• Impact on hiring plans: The rise in NI costs could make it more expensive to hire additional staff, potentially leading family businesses to delay or reconsider expansion plans. This could affect growth strategies and resource allocation for projects reliant on workforce increases.

What Family Business Owners Should Consider

For family business owners, the rise in NI contributions introduces both financial pressures and the need for proactive planning. Here are key considerations for navigating these changes effectively:

1. Assess the financial impact on payroll and operating costs

   With the increase in NI contributions, family businesses will see a rise in payroll expenses, which could affect profit margins. This will be particularly relevant for businesses with larger workforces. By reviewing cash flow forecasts and revisiting budget allocations, owners can work to maintain financial resilience amid these changes.
   

2. Explore operational efficiencies

   To counterbalance higher NI contributions, family business owners can look for ways to reduce operational costs in other areas. Options may include automating certain tasks, renegotiating supplier contracts, or reviewing overhead expenses. These adjustments, even if modest, can add up over time and help manage increased payroll costs.
   

3. Consult with a financial adviser or tax specialist

   Engaging a financial adviser or tax specialist can help family businesses understand the broader impact of the NI increase on both individual and business finances. These professionals can provide guidance on tax-efficient compensation options, cash flow planning, and long-term financial sustainability.

Looking Forward

The NI increase presents potential challenges for family businesses, but with careful planning, these impacts can be managed.

Taking proactive steps now will help family businesses navigate the new financial landscape and improve long-term financial resilience.

About the Author - Jeff Simpson is a Chartered Financial Planner at Hymans Robertson Personal Wealth. Find out more by visiting their website here  The contents of this article is for general information purposes only and should not be regarded as financial advice. It should not be considered a substitute for regulated advice on specific circumstances and objectives.

Watch an on-demand webinar, where Jeff Simpson from Hymans Robertson Personal Wealth and tax expert Anthony Whatling from Alvarez & Marsal, discuss the various outcomes of the Autumn Budget and their implications for family business owners. It is for general information purposes only and should not be regarded as financial advice. It should not be considered a substitute for regulated advice on specific circumstances and objectives.