Struggling with Rising NICs? Business Solutions to Stay Afloat

From April 2025, employer National Insurance Contributions (NICs) will rise from 13.8% to 15% on salaries above £5,000, as announced in the October 2024 budget. While this increase might seem minor at first glance, it poses a significant financial strain for businesses—especially those that employ large numbers of staff on lower wages.

If your business is already facing cash flow challenges, this added burden may leave you wondering how to absorb the extra costs. But before considering drastic measures like shutting down, there are several practical steps you can take to adjust to these financial pressures.

1. Review Your Business Costs

The first step is to conduct a thorough financial review. Identify areas where you can cut unnecessary expenses without sacrificing efficiency. Could you negotiate better rates with suppliers? Can you reduce discretionary spending? Small changes across multiple areas can add up and ease the pressure of higher NICs.

2. Consider Restructuring

If cash flow issues are becoming a serious concern, a business restructure might be the best option. Restructuring is not about closing down—it’s about reshaping your business to operate more efficiently. This could involve streamlining operations, renegotiating contracts, or consolidating debts into more manageable payments.

At Parker Walsh, we offer tailored restructuring solutions to help businesses stabilise their finances and avoid insolvency.

3. Company Voluntary Arrangement (CVA)

A Company Voluntary Arrangement (CVA) can be a useful tool for businesses that are struggling with debts but want to continue trading. A CVA allows you to negotiate new repayment terms with your creditors, making monthly payments more manageable. This can free up cash flow to help absorb the NIC increase without putting your business at risk.

If you’re struggling to pay suppliers, HMRC, or other creditors, a CVA could be the right option to get your finances back on track.

4. Business Administration

For businesses experiencing more severe financial difficulties, entering administration could be a solution. Administration is a formal process that protects your company from legal action by creditors while a recovery plan is put in place.

Many businesses that go through administration emerge stronger on the other side, with a leaner structure and a more sustainable future.

5. Members’ Voluntary Liquidation (MVL)

If you’ve been considering retiring or closing your business, now might be the time to explore a Members’ Voluntary Liquidation (MVL). This is a tax-efficient way to close a solvent company and distribute its assets among shareholders.

With the rising NICs, some business owners may find it financially beneficial to step away rather than continue to absorb increasing operational costs.

6. Creditors’ Voluntary Liquidation (CVL)

If your business is no longer viable and cannot meet its financial obligations, a Creditors’ Voluntary Liquidation (CVL) may be the best course of action. This formal insolvency process allows you to close the company in a structured and responsible way while protecting yourself from personal liability.

7. Seek Professional Advice Early

The most important thing to remember is that you are not alone. Many businesses face financial difficulties, and early intervention can provide more options to recover. Whether you need help restructuring, negotiating with creditors, or exploring formal insolvency solutions, Parker Walsh can guide you through the process.

Conclusion

The increase in employer NICs will undoubtedly challenge many businesses, but there are multiple ways to adapt. From reducing costs and restructuring to more formal processes like CVAs or administration, you have options beyond simply closing your doors.

If you’re concerned about how the NIC increase will impact your business, get in touch with Parker Walsh today. Acting now can make all the difference in securing a sustainable future for your company.

_{Photo by Artem Podrez}