As the CBI sounds the alarm on an economic slowdown, Purbeck Insurance Services, the UK’s only provider of personal guarantee insurance to SME owners and directors, is arming SMEs with five practical tips to improve their financial stability to help mitigate the impact of increased NIC contributions from April 2025:

Higher pricing - review current pricing arrangements to bake in the additional costs on a contribution basis to ensure that margins are not adversely impacted by the increases in NICs.

Enhance remunerations structures – offer more flexible benefits in lieu of salary – for example, enhanced pension contributions and changes to holiday allocations.

Consider salary sacrifice benefit schemes - implement schemes where the employee’s salary reduces in exchange for an employee benefit. For example, electric cars, qualifying workplace nursery, cycle to work schemes etc. This can also deliver an income tax saving for employees and enhance employee satisfaction.

Investment in training and development – investigate the cost of enhancing or upskilling employees to improve productivity within the business, or repurposing staff to achieve more with existing resources.

Use the Enhanced Employment Allowance - this will rise from £5,000 to £10,500 per year. This allowance offsets NIC liabilities, effectively neutralising the impact of the rate increase for many eligible SMEs.

Comments Todd Davison, Managing Director, Purbeck Insurance Services, “It is encouraging that the number of corporate insolvencies in 2024 was down 5% compared to 2023, but it’s what lies ahead that is really concerning small and medium sized businesses."

"Many SMEs are naturally worried about the impending cost increases and will be looking to make savings where they can. Rather than resorting to measures such as cutting staff though, firms can take proactive steps now to empower themselves and face the challenging times ahead with greater confidence.”