Setting up multiple companies to separate business interests can seem very straight forward. There are however important considerations. We explore the implications of owning too many companies.
The Impact of Higher Employer NI on UK Business Sales
12 June 2025
Accounting & Compliance, Building a Business, Cloud Accounting, Selling a Business, Structuring a Business
What Changed with Employer National Insurance in April 2025?
With ongoing fiscal pressures, the UK government has periodically adjusted National Insurance (NI) contributions and thresholds.
In April 2025, it introduced several key changes to Employer National Insurance:
- Rate increase from 13.8% to 15%
- Secondary threshold lowered from £9,100 to £5,000
- Employment Allowance doubled from £5,000 to £10,000
While the government suggested most small businesses would see little change, those with larger or lower-paid workforces are already feeling the pressure.
The Hidden Impact: NI and Business Sales & Valuations
Employer NI contributions are a statutory cost incurred for every employee earning above the threshold.
Any increase in NI rates pushes up overheads.
For businesses with tight margins or a large headcount, this leads to reduced EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortisation) which is a critical metric for valuing businesses.
Since valuation methods like earnings multiples and discounted cash flow are based on EBITDA, even relatively small increases in costs can have a disproportionate impact.
Investors typically apply a multiple to EBITDA to determine enterprise value.
A £100,000 increase in NI costs could reduce enterprise value by £500,000 at a 5x EBITDA multiple.
That’s a £100k hit to profit, and a half-million-pound drop in business value.
Higher employer NI may also signal future cost pressures and reduced labour flexibility, lowering buyer confidence.
Acquirers may revise forecasts, increase risk premiums, or seek price reductions during due diligence.
Industries Most Affected by NI Increases
Some sectors will be hit harder than others.
Labour-intensive industries with large numbers of lower-paid staff will feel the pressure most:
- Care providers
- Hospitality and catering
- Transport and logistics
- Retail
In contrast, capital-light or tech-focused businesses, which rely less on headcount and more on automation, may experience minimal impact.
How to Protect Your Business Value
If you’re planning to sell your business in the short to medium term, early action is essential.
Consider:
- Modelling the financial impact of NI increases on your forecasts
- Optimising employment structures — e.g. salary sacrifice schemes
- Reviewing pricing strategy to protect margins
- Investing in automation or outsourcing
- Strengthening operational efficiency to boost EBITDA
Strategic planning and cost control can go a long way toward rebuilding lost value and strengthening your position in future negotiations.
Speak to an Expert
At Friend & Grant, we work with business owners to maximise business value.
From valuation and growth planning to tax-efficient structuring and exit support, we’re with you at every stage of your business journey.
Ready to talk?
If you’re thinking about selling your business in the next few years, the time to start preparing is now.
Call us on 01634 731390 or Book a Discovery Meeting to discuss your exit strategy.
With the right planning, you can maximise your business’s value and ensure a smooth, profitable transition.
Our services
If you would like to find out more about some of our services that might help you please take a look at our related pages:
Blogs related to Planning to Business Sales
Take a look at our other blogs on the topic of business sales and building value:
The Significance of EBITDA in valuing your company
Maximising the Value on Sale of Your Business: The Reality Check You Need
The content in this blog is correct as at 12th June 2025 See terms and conditions.
