Independent high street shops could take brunt of national insurance hike

Independent high street shops could face the worst of Rachel Reeves’ tax raid as a direct result of the hike in employers’ National Insurance Contributions (NICs), a new analysis shared with City AM has found.

The analysis, commissioned by small business platform Enterprise Nation, revealed the impact of the 1.2 per cent hike in employers’ NICs – while also considering the increase in employment allowance – across four different “typical” business scenarios. 

The range of businesses included typical circumstances regarding numbers of staff and salaries across a range of small firms, including the likes of high street shops, e-commerce, online retail and recruitment.

As a result, it found that a busy high street cafe with up to 26 staff members at a “lower paid rate” would face a 100 per cent surge in NICs.

This is a “stark contrast” when comparing the findings to a small e-commerce business with fewer employees, albeit at a higher-paid rate, which will face an increase of around 17 per cent.

“The calculations we’ve used here illustrate the complicated range of challenges that small businesses are facing right now,” Emma Jones, founder and chief executive of Enterprise Nation, said.

Jones added: “Entrepreneurs are always resilient – but they will need help to navigate the road ahead and start dealing with the implications in good time for the changes in April 2025. 

“We must not allow this to threaten vulnerable businesses like independent high street shops and cafes.”

In order to navigate such change, Jones stressed that small businesses must look to technology adoptions to enhance productivity, competition and innovation strategies.

Entrepreneur Oli Tyler, founder of plant-gifting firm Shroot, said he is confident that he’ll be able to manage the tax hikes for his own business, however, he remains concerned for those who will face the hardest of challenges to come. 

“My main concern isn’t for chains or big brands but rather for local businesses — soft play centres, larger independent shops, amusement parks — that will likely feel the squeeze from these new costs,” Tyler said.