What could the proposal to introduce employers NIC on Partnership profits mean?

With the impending Autumn Budget 2025 around the corner, Price Bailey’s team of experts have been keeping a close eye on the key speculations. In our most recent Quick Reads, Sarah Howarth, a Tax Director at Price Bailey, discusses the impact that the proposed Employer’s National Insurance Contribution (NIC) would have on those affected.

What is the rationale behind the proposal to introduce Employer’s NIC at 15% on partnership profits?

A cornerstone of Labour’s policy is that those with the broadest shoulders should bear their fair share of tax. If this proposal goes ahead, the vast majority of those affected would be within the top 10% of taxpayers.

What is the initial reaction from those who could potentially be impacted?

The proposal hasn’t been particularly popular. It may be prudent to take a step back and consider the overall fairness of the proposal. Partners are legally self-employed, so is it necessarily right that they should be taxed like employees when, in fact, they don’t receive any of the benefits of employment, such as sick pay?

What might be the wider implications if this proposal is included in the Budget?

As we saw from last year’s rise in employer’s National Insurance contributions, there were recruitment freezes and pay delays. Partnerships employ thousands of people across the UK, so it could be expected that a reduction in investment might be seen by these businesses.