As business owners and finance teams will be well aware, the Employer’s NIC rate increased from 13.8% to 15% from April 2025. While seemingly a small increase on paper, this has already had major financial implications for businesses of all sizes.

One area in particular that will be impacted by this change is the cost of providing Benefits in Kind (BIKs) for employees.

How are BIKs affected by increased Employer NICs?

The Employer NIC rate increase applies to all employment earnings above the secondary threshold, which includes most taxable Benefits in Kind.

The increase is relatively minor, effectively costing an additional £12 per £1,000, but businesses offering extensive benefit packages could find themselves facing considerably higher aggregated costs.

Benefits in kind are non-cash perks provided employees on top of their salaries, including:

• Company cars

• Private medical insurance

• Interest-free/low-interest loans

• Gym memberships

• Accommodation

The impact of NICs on Benefits in Kind – Examples

Employers pay Class 1A National Insurance Contributions on the taxable value of Benefits in Kind reported in their annual P11D submission. This means an increase in the rate of NICs leads to an increase in that liability.

Here is a quick example table:

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As you can see, the individual cost increases here aren’t massive. However, larger businesses with multiple employees receiving a range of BIKs will see a rapid accumulation of increased costs.

What should businesses be doing?

We expect this to be a topic of real interest among our business clients as we progress through 2025/26. If you are concerned about the potential financial impact of this situation, here are some tips to help you manage the increased cost.

• Review your BIKs portfolio: Take a close look at the cost-effectiveness of your current benefit offerings and consider changing things up if they are costing too much.

• Measure impact: Review your current BIKs to make sure they are still delivering value for money. Smart accounting software can help you forecast next year’s BIK-related NIC liability under the new rate.

• Budget for change: Factor higher payroll costs into your future budget and financial planning

• Communicate clearly: Prepare for questions if benefit offerings are set to change. This won’t affect their take-home pay, but it may change the extent of benefits available

Special consideration should be made to the importance of these benefits for employee morale and productivity. An expensive benefit, but one that differentiates you as an employer and helps you attract and retain the best talent, is good value!

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If you are concerned about the impact of these changes, the Gravitate team are happy to review your current benefits strategy and forecast your NIC liabilities under the new rate. Send us a message today!