Raise employer National Insurance

Policy baseline

The implemented Budget measure raises the employer NIC rate and lowers the threshold. Official costings score around GBP 24.2bn receipts in 2027-28.

• Rate rises from 13.8 percent to 15 percent.
• Secondary threshold falls from GBP 9,100 to GBP 5,000.
• OBR expects labour-supply and wage effects.

Core trade-offs

The direct beneficiaries are public services and fiscal headroom. The costs fall mainly on employers, workers and consumers. The main economic question is higher labour costs reduce jobs, wages or margins.

• Public services and fiscal headroom gain most directly.
• Costs fall mainly on employers, workers and consumers.
• Key risk: higher labour costs reduce jobs, wages or margins.

Fiscal impact by 2027-28

-GBP 27.0bn to -GBP 18.0bn. Central estimate: -GBP 24.2bn.

• Positive numbers mean net fiscal cost; negative numbers mean Exchequer savings.
• Main effect is higher employer payroll-tax receipts.
• Lower wages, profits and labour supply reduce part of the yield.
• Incidence is likely shared across workers, firms and consumers.
• This is not an official costing.

Economic impact by 2027-28

• Jobs: Little direct job effect; sector-specific taxes can reduce hiring in affected industries.
• Wages: Legal taxpayers may shift costs to workers, owners or consumers over time.
• Prices: Some pass-through likely where market power or fixed demand exists.
• GDP / productivity: Usually mildly negative before spending use; stronger if investment or mobility responses rise.

Assessment

This is a real trade-off, not a free gain. Public services and fiscal headroom benefit, while employers, workers and consumers bear most costs. Overall output depends on behaviour, capacity and pass-through.

Confidence: Medium-low. Higher on the policy target and fiscal channel; lower on behaviour, pass-through and economy-wide effects.

Main risks

• Behavioural response: Avoidance, timing and relocation can reduce receipts.
• Incidence uncertainty: Legal taxpayers may shift costs to workers, consumers or investors.
• Investment risk: Higher taxes can reduce investment where returns are mobile.

Safeguards

• Use HMRC microsimulation before legislating.
• Close avoidance routes before rate rises.
• Review receipts and investment annually.

Academic evidence

UK government evidence

Sources

• PolicyLens illustrative scenario methodology for raise employer national insurance Internal - PolicyLens, 2026
• Autumn Budget 2024 policy costings UK government costing - HM Treasury, 2024
• The Incidence of Payroll Taxation Academic article - Gruber, Journal of Public Economics, 1997
• Tax Incidence Academic chapter - Kotlikoff and Summers, Handbook of Public Economics, 1987
• Economic and fiscal outlook October 2024 UK fiscal forecast - Office for Budget Responsibility, 2024
• Change: Labour Party Manifesto 2024 Party policy source - Labour Party, 2024

Other Labour policies

• Apply VAT to private school fees
• Replace non-dom tax status
• Raise capital gains tax rates
• Extend the Energy Profits Levy
• Capitalise the National Wealth Fund
• Capitalise Great British Energy
• Expand the Warm Homes Plan
• Move renewables charges to tax