With rising costs already putting pressure on the care sector, the latest National Insurance increases could be the tipping point for many providers. If you’re running a care home or managing finances within social care, it’s crucial to understand how these updates affect your bottom line, and what limited options exist to respond.

Employers’ National Insurance Increase Burden Is Rising

A 1.2% increase to employer National Insurance contributions may not sound extreme in isolation, but when combined with other changes, it quickly adds up. The secondary threshold, the point at which employers begin paying NI, has also been reduced, meaning more of each employee’s wage is now subject to the tax.

Real Cost Increases for Care Homes

Care providers with a predominantly minimum-wage workforce could see total staff costs rise by up to 14.7% in the 2025/26 tax year. This includes:

• 6.7% national minimum wage increase
• 1.2% employer NIC increase
• An effective 3–6% additional cost from the lower NIC threshold

These figures represent a 25% jump in staffing costs when viewed across the past two years.

Employment Allowance – Helpful, but Limited

The employment allowance has doubled to £10,500, which sounds generous, until you realise it only covers around nine staff members’ NIC increase. It also excludes companies doing 50% or more work in the public sector and applies once per group, not per entity.

Fewer Workarounds Than You’d Hope

While salary sacrifice schemes (e.g. pensions, EV schemes) can help reduce NIC, they’re not viable for staff on or near minimum wage due to legal pay floor protections. Recruiting under-21s or apprentices can offer some savings, but this isn’t a strategy that fits every workforce or service model.

What Are Providers Doing?

Care businesses are exploring cost control in other areas; from energy and insurance to CapEx deferrals and group restructuring. However, with funding uplifts from local authorities still falling short of covering rising costs, many providers are facing margin compression or delaying growth plans.

Want the Full Picture?

We recently hosted a 30-minute webinar where experts from Hazlewoods Accountants and Business Advisers, and Delphi Care Solutions unpacked these changes in detail, using real-world figures and offering practical insights on how care businesses are responding.