From 6 April 2026, two simultaneous changes to employer National Insurance Contributions came into force that together represent the largest single increase in employment costs for UK businesses in a generation. The employer NIC rate increased from 13.8% to 15%, and the secondary threshold — the salary level at which employers begin paying NIC on employee earnings — dropped from £9,100 per year to £5,000 per year. Both changes apply to every employer in the UK, but the impact falls particularly hard on healthcare practices where staffing costs already represent the single largest overhead and where margins are already under pressure from years of NHS funding constraints.
For GP surgeries, dental practices, pharmacies, care homes, and private clinics across England and Wales, the combined effect of these two changes means significantly higher employer NIC bills from April 2026 — not because they have hired more staff or increased salaries, but simply because the rules have changed. A practice that employed the same team on the same salaries as it did in March 2026 will pay materially more in employer NIC from April 2026 onwards with no corresponding increase in NHS contract income, dispensing fees, or private revenue.
This guide explains precisely what has changed, quantifies the cost impact across different healthcare practice types and staffing structures, explains what the Employment Allowance increase to £10,500 does and does not offset, covers the interaction with the April 2026 National Living Wage increase, and sets out the specific planning responses available to healthcare employers who want to manage the additional cost burden in 2026/27.
What Changed on 6 April 2026: The Two-Part Increase
The April 2026 employer NIC changes involve two distinct but simultaneous adjustments that compound each other in their impact on employer costs.
Change 1 — The rate increase from 13.8% to 15%
The employer Class 1 NIC rate increased from 13.8% to 15% on earnings above the secondary threshold. This is a 1.2 percentage point increase — which sounds modest but represents an increase of approximately 8.7% in the employer NIC cost per employee relative to the previous rate. For a member of staff earning £35,000 per year, the employer NIC bill increases by approximately £312 per year from the rate change alone.
Change 2 — The secondary threshold drop from £9,100 to £5,000
The secondary threshold is the annual earnings level above which employers start paying NIC on an employee’s salary. By dropping from £9,100 to £5,000, HMRC has brought more of each employee’s earnings into the NIC charge. For every employee earning above £5,000, the employer now pays 15% NIC on an additional £4,100 of earnings that was previously exempt — a fixed additional cost of £615 per employee per year regardless of their salary level.
The combined effect:
The two changes together mean that for a full-time employee earning £30,000 per year, the employer NIC bill in 2026/27 is calculated as follows:
2025/26: (£30,000 − £9,100) × 13.8% = £20,900 × 13.8% = £2,884 per year 2026/27: (£30,000 − £5,000) × 15% = £25,000 × 15% = £3,750 per year
Increase per employee at £30,000 salary: £866 per year — a 30% increase in employer NIC cost.
This is not a marginal adjustment. For a GP surgery with ten salaried staff averaging £30,000 each, the total additional employer NIC bill in 2026/27 is approximately £8,660 per year compared to 2025/26 — before accounting for the National Living Wage increase that also took effect on 1 April 2026.
Key Point: The secondary threshold drop to £5,000 affects every employee on your payroll, including part-time staff, term-time workers, and lower-paid healthcare support roles. Many care homes and pharmacies employ significant numbers of part-time workers who previously sat below or close to the old £9,100 threshold. Those workers now generate employer NIC from a much lower earnings point, creating a disproportionate impact on employers with large part-time workforces.
The Employment Allowance Increase: What It Covers and What It Does Not
Alongside the employer NIC rate increase, the government raised the Employment Allowance from £5,000 to £10,500 per year from April 2026. The Employment Allowance allows eligible employers to reduce their employer NIC bill by up to £10,500 each year — effectively meaning the first £10,500 of employer NIC liability is not payable.
Who is eligible for the Employment Allowance in healthcare:
Most small and medium-sized healthcare practices qualify for the Employment Allowance. Eligibility requires that your total employer NIC bill in the prior tax year was less than £100,000. For most independent GP surgeries, dental practices, pharmacies, and community care providers, this threshold is comfortably met. However, larger group practices, dental corporate groups, and care home chains may exceed the £100,000 employer NIC threshold and therefore be ineligible for the Employment Allowance entirely.
What the Employment Allowance increase means in practice:
For an eligible practice with an employer NIC bill below £10,500, the Employment Allowance covers the entire liability — meaning no employer NIC is payable. For a small pharmacy employing three members of staff whose combined employer NIC bill in 2026/27 is £8,000, the Employment Allowance absorbs the full amount and the practice pays nothing.
For practices with larger NIC bills, the £10,500 Employment Allowance offsets the first £10,500 of liability. A GP surgery with a total employer NIC bill of £35,000 in 2026/27 pays £24,500 after the allowance — compared with a post-allowance bill of approximately £18,000 at the old rates and old £5,000 allowance. The net increase in cost is still substantial even after the allowance is factored in.
The Employment Allowance is claimed per business, not per employee:
This is a critical limitation for healthcare group structures. A dental group operating three practices through three separate limited companies can potentially claim the Employment Allowance in each company — subject to the connected companies rules, which restrict the allowance to one claim per group of connected companies. If your practice group structure involves multiple connected entities, the Employment Allowance may only be available once across the group rather than once per entity. Your payroll for healthcare provider and business tax adviser should confirm the Employment Allowance eligibility position for your specific structure from the outset of 2026/27.
The Cost Impact Across Healthcare Practice Types: Worked Examples
Understanding the abstract rate changes is one thing — quantifying the actual cash impact for your practice is what enables planning. Here are worked examples across the main healthcare practice types showing the full 2026/27 NIC cost increase compared to 2025/26.
Example 1 — GP Surgery: 12 Staff
A GP surgery employs 12 staff including two practice managers, four receptionists, three healthcare assistants, one pharmacist, one social prescriber, and one administrator. Average salary across the team is £28,500.
2025/26 employer NIC (before Employment Allowance): 12 × (£28,500 − £9,100) × 13.8% = 12 × £19,400 × 13.8% = 12 × £2,677 = £32,124 After £5,000 Employment Allowance: £27,124
2026/27 employer NIC (before Employment Allowance): 12 × (£28,500 − £5,000) × 15% = 12 × £23,500 × 15% = 12 × £3,525 = £42,300 After £10,500 Employment Allowance: £31,800
Additional employer NIC cost in 2026/27: £4,676 per year — even after the Employment Allowance increase is factored in.
This £4,676 must come from somewhere in the practice budget. With the GP contract uplift of 3.6% providing approximately £7,800 of additional core contract income for a typical practice, the NIC increase alone consumes 60% of that uplift before any other cost increase is considered.
Example 2 — Dental Practice: 8 Staff
A mixed NHS/private dental practice employs eight staff — two dental nurses, one hygienist, one receptionist, one practice manager, one treatment coordinator, and two part-time dental nurses. Salaries range from £22,000 (part-time nurses) to £38,000 (practice manager). Average salary £27,000.
2025/26 employer NIC (before Employment Allowance): 8 × (£27,000 − £9,100) × 13.8% = 8 × £17,900 × 13.8% = 8 × £2,470 = £19,762 After £5,000 Employment Allowance: £14,762
2026/27 employer NIC (before Employment Allowance): 8 × (£27,000 − £5,000) × 15% = 8 × £22,000 × 15% = 8 × £3,300 = £26,400 After £10,500 Employment Allowance: £15,900
Additional employer NIC cost in 2026/27: £1,138 per year after the Employment Allowance increase.
For this practice the Employment Allowance increase absorbs most of the additional cost — the practice is relatively small and the allowance increase is proportionally more significant. However, this assumes the practice remains eligible for the Employment Allowance, which should be confirmed for 2026/27.
Example 3 — Community Pharmacy: 6 Staff
A community pharmacy employs six staff including two dispensers, one pharmacy technician, one counter assistant (part-time, 20 hours per week at £12.50 per hour — approximately £13,000 per year), one pharmacist manager, and one delivery driver (part-time). Average full-time equivalent salary £24,500.
The secondary threshold drop from £9,100 to £5,000 is particularly significant for the two part-time workers. The counter assistant earning £13,000 previously generated employer NIC on £3,900 of earnings (£13,000 − £9,100). They now generate employer NIC on £8,000 of earnings (£13,000 − £5,000) — more than double the NIC-bearing earnings from a single threshold change.
2025/26 employer NIC (before Employment Allowance): Total NIC across all staff: approximately £15,200 After £5,000 Employment Allowance: £10,200
2026/27 employer NIC (before Employment Allowance): Total NIC across all staff: approximately £20,800 After £10,500 Employment Allowance: £10,300
Additional employer NIC cost in 2026/27: approximately £100 per year after the allowance — in this case the Employment Allowance increase almost entirely offsets the rate and threshold changes for this size of practice.
This example illustrates that for smaller healthcare employers with NIC bills below or close to the Employment Allowance level, the April 2026 changes are largely neutralised by the allowance increase. The burden falls hardest on medium-sized practices where the NIC bill significantly exceeds the Employment Allowance.
Example 4 — Care Home: 45 Staff
A 40-bed care home employs 45 staff including care workers, senior carers, a registered manager, domestic staff, kitchen staff, and administrative personnel. Many staff are part-time or work variable hours. Average annual salary across the workforce is £24,000, with significant variation between care workers (£22,000–£26,000) and the registered manager (£45,000).
The secondary threshold drop is highly impactful for care homes because a significant proportion of the workforce earns between £5,000 and £9,100 in annual earnings from part-time hours. These workers previously generated no employer NIC. From April 2026, they generate 15% NIC on their entire earnings above £5,000.
2025/26 employer NIC (before Employment Allowance): 45 staff at average £24,000: approximately £93,000 Care homes with NIC bills approaching £100,000 may be close to or above the Employment Allowance eligibility threshold. Assuming eligibility: after £5,000 allowance: £88,000
2026/27 employer NIC: 45 staff at average £24,000: approximately £121,500 After £10,500 Employment Allowance: £111,000
Additional employer NIC cost in 2026/27: £23,000 per year — a very significant increase for an operator whose staffing costs already represent 55–65% of total revenue.
For care homes, this NIC increase compounds other pressures including the National Living Wage rise (covered below) and ongoing local authority fee negotiation challenges. Our healthcare accounting team is working with care home operators on staffing cost modelling that reflects all of these changes simultaneously.
The National Living Wage Increase: The Compounding Effect
The employer NIC changes did not arrive alone. On 1 April 2026, the National Living Wage also increased — rising to £12.21 per hour for workers aged 21 and over (an increase from £11.44 per hour in 2025/26, representing a 6.7% rise). The 18-20 age bracket rate also increased, as did the apprentice rate.
For healthcare employers — particularly care homes, pharmacies, and GP practices that employ a significant number of workers at or near the National Living Wage — the interaction between the NLW increase and the employer NIC changes compounds the cost impact in two ways.
First, higher wages directly increase the employer NIC bill because NIC is charged on gross wages — a higher hourly rate means higher NIC-bearing earnings for each affected worker.
Second, for part-time workers previously earning below the old NIC secondary threshold, the NLW increase may push their annual earnings above the new £5,000 threshold, bringing them into scope for employer NIC for the first time.
Worked Example — Care Worker at National Living Wage:
A care worker working 25 hours per week at the old NLW rate of £11.44 per hour earns approximately £14,872 per year.
2025/26 employer NIC: (£14,872 − £9,100) × 13.8% = £5,772 × 13.8% = £797 per year
The same care worker at the new NLW rate of £12.21 per hour working the same hours earns approximately £15,873 per year.
2026/27 employer NIC: (£15,873 − £5,000) × 15% = £10,873 × 15% = £1,631 per year
Combined NLW and NIC increase cost per care worker: £834 per year — more than double the previous employer NIC cost, driven by both the rate change and the threshold drop working together on a higher base salary.
For a care home with 30 care workers at or near the National Living Wage, this combined increase represents approximately £25,000 of additional annual staffing cost — from NIC and NLW changes alone, before any merit pay increases are considered.
Healthcare employers should be reviewing their payroll and staffing cost budgets immediately to incorporate both the NIC changes and the NLW increase together. Modelling them separately understates the full impact.
Impact on Specific Staff Categories in Healthcare
Salaried GPs and GP Registrars
The employer NIC increase directly affects GP practices that employ salaried GPs — increasingly common as practices have moved away from partnership models toward employed GP arrangements. A salaried GP earning £70,000 per year generates employer NIC in 2026/27 of (£70,000 − £5,000) × 15% = £9,750 — compared to (£70,000 − £9,100) × 13.8% = £8,404 in 2025/26. The increase per salaried GP is £1,346 per year.
For practices using ARRS funding to recruit salaried GPs under the new GP Reimbursement Scheme, the employment on costs reimbursed should include the employer NIC at the new 15% rate. Ensure your reimbursement claims reflect the 2026/27 NIC rate, not the old 13.8% — the difference affects how much the NHS reimbursement covers of the actual employment cost. Our GP practice accounting team is reviewing ARRS claim structures for all GP practice clients to ensure the new NIC rate is correctly incorporated.
Dental Associates on PAYE
Dental associates who are genuinely employed rather than self-employed generate employer NIC at the new rates. However, many dental associates remain self-employed — in which case employer NIC does not apply. The employment status determination for dental associates has been an ongoing area of HMRC scrutiny, and the increased cost of employment at the new NIC rates creates an additional incentive for practices to correctly classify their associates from the outset. Misclassifying an employed associate as self-employed generates employer NIC liability retrospectively at the new higher rate. Our dental practice accounting team can review associate agreements and help practices confirm the correct employment status position.
Locum Staff Engaged Through Agencies
Healthcare practices that engage locum doctors, nurses, or pharmacists through agencies are generally not the employer for NIC purposes — the agency bears the employer NIC liability as the employer. However, practices that engage locums directly — paying them gross without going through an agency — may be treated as the employer for NIC purposes depending on the nature of the arrangement. The off-payroll working rules (IR35) also interact here. If a locum works through a personal service company and is inside IR35, the practice may be the deemed employer for employment tax purposes and therefore liable for employer NIC at 15% on the deemed employment income. This is an area where taking advice before the arrangement is put in place is far preferable to dealing with a retrospective NIC liability. Our healthcare accounting specialists advise on employment status and NIC liability for all types of healthcare staffing arrangements.
Care Home Bank and Agency Staff
Many care homes supplement their permanent workforce with bank staff and agency workers. Bank workers employed directly by the care home generate employer NIC at the new rates. Agency workers engaged through a staffing agency do not generate direct employer NIC for the care home — the agency bears that cost, though it is typically passed through in the agency fee. Care homes should review their staffing mix in light of the NIC changes — the relative cost of directly employed bank staff versus agency staff has shifted, and the optimal mix for 2026/27 may differ from prior years.
Mitigating Strategies: How Healthcare Employers Can Manage the Additional Cost
The April 2026 NIC changes are legislated and unavoidable — there is no opt-out. However, there are several legitimate planning strategies that healthcare employers can use to manage the additional cost burden within the constraints of the law.
1. Claim the Employment Allowance immediately and correctly
Ensure the £10,500 Employment Allowance is being claimed from April 2026 through your payroll software. If you changed payroll provider recently or if your payroll software has not been updated, the allowance may not be applying automatically. Check your first April 2026 payroll run to confirm the allowance is being offset against your employer NIC liability. Unclaimed Employment Allowance results in unnecessary cash payments to HMRC that must be reclaimed.
2. Review the salary sacrifice opportunity for pension contributions
Salary sacrifice pension arrangements allow employees to give up part of their gross salary in exchange for an employer pension contribution of equivalent value. Because the pension contribution is not salary, it does not attract employer NIC — whereas the equivalent amount paid as salary does. At the new 15% employer NIC rate, every £1,000 redirected from salary to employer pension contribution through a salary sacrifice arrangement saves £150 in employer NIC.
For a healthcare practice with 15 employees each sacrificing £2,000 per year into pensions via salary sacrifice, the employer NIC saving is 15 × £2,000 × 15% = £4,500 per year — a meaningful offset against the NIC increase. Employees also benefit from not paying employee NIC or income tax on the sacrificed amount, making salary sacrifice a win for both employer and employee.
Our payroll for healthcare team can help you implement or review salary sacrifice arrangements for your practice. If you already have a salary sacrifice scheme, it is worth reviewing whether contribution levels can be increased to maximise the NIC saving for 2026/27.
3. Review benefit in kind arrangements
Some benefits that employers provide — such as company cars, private medical insurance, or gym memberships — attract Class 1A NIC at the end of the tax year. Class 1A NIC is also increasing from 13.8% to 15% from April 2026. Review whether the benefits you provide to staff are still cost-effective at the new rate or whether alternative remuneration structures might be preferable.
4. Review staffing structure and hours
For healthcare employers with a significant proportion of part-time staff, the threshold drop from £9,100 to £5,000 means more of those employees’ earnings now attract NIC. In some cases it may be worth reviewing whether contracted hours and pay structures remain optimal — though any restructuring must be genuinely led by business need and done in a way that is fair and lawful, not solely to avoid NIC. This is a complex area where employment law advice should be sought alongside tax advice.
5. Model the impact on pricing and NHS contract income
For private healthcare providers — private clinics, private dental practices, and private pharmacies — the additional NIC cost can in principle be absorbed through fee adjustments. For NHS providers, the contract income is fixed and cannot be adjusted to reflect cost increases. This structural asymmetry between NHS and private practice is a key factor in the ongoing pressures on GP practice and dental practice finances that rely heavily on NHS income. The NIC increase is one more pressure on a system where cost increases cannot simply be passed to the end user.
6. Ensure bookkeeping reflects the new rates from April
Ensure your bookkeeping system is posting employer NIC at 15% from April 2026 payroll onwards. Management accounts produced using the old 13.8% rate will understate staff costs and overstate profit — leading to partner drawings or dividend decisions based on incorrect profit figures. This is a simple but important point that is easy to miss if your accountant or bookkeeper has not updated the system for the new rates.
The Broader Context: NIC Changes Alongside Other April 2026 Cost Increases
The employer NIC changes do not sit in isolation. April 2026 has brought a cluster of simultaneous financial pressures for healthcare employers, and the full impact can only be understood by looking at all of them together.
The dividend tax rate increase from 6 April 2026 affects incorporated healthcare practice owners extracting profit. The National Living Wage increase from 1 April 2026 raises base staff costs. The writing down allowance reduction to 14% reduces the annual tax relief on capital expenditure pools. MTD for Income Tax adds administrative obligations for self-employed partners. And the NHS dental contract reforms and GP contract changes alter the revenue side of NHS practice finances simultaneously.
For healthcare practice owners and managers, the challenge of 2026/27 is not any single change in isolation — it is the combined financial effect of all these changes arriving together at the start of the same tax year. A practice financial review that models all of these changes simultaneously — revenue, staffing costs, NIC, allowances, tax rates — is the most effective way to understand the true 2026/27 financial position and plan accordingly.
Our specialist healthcare accounting team is conducting 2026/27 financial impact reviews for practice clients across GP, dental, pharmacy, and care home sectors. If you have not yet had a comprehensive review of your practice finances incorporating all April 2026 changes, contact our team for an immediate consultation.
Frequently asked questions
Employer NIC changes — what healthcare and dental practices need to know.
Yes. The employer NIC rate increase to 15% and threshold drop to £5,000 apply to all employees regardless of their wage level, subject to the secondary threshold. Any employee earning above £5,000 per year generates employer NIC at 15% on their earnings above that threshold.
For example, a part-time healthcare support worker earning £8,000 per year now generates employer NIC of (£8,000 − £5,000) × 15% = £450 — whereas in 2025/26 they generated NIC of £0 (below the old £9,100 threshold). The threshold drop brings lower-paid and part-time workers into scope for the first time, which is why the impact is disproportionate for care homes and pharmacies with large part-time workforces.
No. Partners in a GP practice are not employees — they are self-employed individuals who pay Class 2 and Class 4 NIC on their profit share rather than Class 1 NIC. Employer NIC at 15% applies only to employees such as salaried staff, healthcare assistants, receptionists, practice nurses, and any employed salaried GPs.
However, GP partners who also have a separate employment arrangement — for example, acting as a director of a PCN company or a GP federation — may generate employer NIC in that separate capacity. Our GP practice accounting team can confirm the correct NIC treatment for all income streams.
No. The Employment Allowance is not available to employers whose total employer Class 1 NIC liability in the prior tax year exceeded £100,000. If your care home’s employer NIC bill in 2025/26 exceeded £100,000, you are not eligible for the £10,500 Employment Allowance in 2026/27.
Given that the NIC rate increase and threshold drop will push many medium-sized care homes above the £100,000 threshold for the first time in 2026/27, it is worth checking whether you will remain eligible in 2027/28. Speak to our healthcare accounting specialists to review your position.
Yes — salary sacrifice pension arrangements are one of the most effective and straightforward ways to reduce employer NIC liability. By redirecting salary to employer pension contributions through a formal salary sacrifice scheme, both the employee and employer avoid NIC on the amount sacrificed.
At the new 15% employer rate, every £10,000 redirected through salary sacrifice saves £1,500 in employer NIC — in addition to the employee’s NIC and income tax savings. Note that salary sacrifice reduces the employee’s contractual salary, which has implications for other salary-related benefits such as mortgage references. Our payroll team can advise on implementing or reviewing salary sacrifice arrangements.
Private dental practices have the flexibility to review their fee schedules and adjust patient charges to reflect increased operating costs — including the employer NIC increase and National Living Wage rise. Whether to do so is a commercial decision that depends on patient price sensitivity, local competition, and the practice’s overall financial position.
For NHS dental practices, the contract income is fixed and cannot be adjusted, making the NIC increase a pure cost pressure. If you are a mixed NHS/private practice, there is an argument for reviewing private fees to compensate for the unrecoverable NIC cost on the NHS side. Our dental practice accounting team can model the fee increase required to maintain your 2025/26 net margin at 2026/27 cost levels.
Summary: the immediate actions for healthcare employers
The April 2026 employer NIC changes are live and their cash impact is already flowing through payroll runs this month. The additional cost cannot be avoided — but it can be managed, planned for, and partially offset through legitimate strategies.
Immediate action checklist
- Confirm the Employment Allowance at £10,500 is being claimed and correctly applied from April 2026.
- Recalculate your total employer NIC bill for 2026/27 at the new rates and update your staffing cost budget and management accounts accordingly.
- Model the combined impact of the NIC increase and the National Living Wage rise together — not separately.
- Review whether salary sacrifice pension arrangements are in place or can be introduced to reduce NIC exposure.
- Confirm the correct NIC treatment for any locum, agency, or contractor staff engaged by your practice.
- Integrate the NIC cost increase into your overall 2026/27 practice financial model alongside the other April 2026 changes to understand the full picture.
Working with a specialist healthcare accountant and payroll provider who understands the specific staffing structures and funding mechanisms of your practice type is the most effective way to manage these changes. A generalist payroll bureau can apply the new rates mechanically — but only a specialist who understands the interaction between ARRS reimbursement, NHS contract income, salary sacrifice, and practice profitability can help you plan around them strategically.
If you have not yet reviewed your 2026/27 staffing cost position in light of the April changes, contact our team for an immediate review. The first quarterly management accounts of 2026/27 will reveal the full cash impact — the question is whether you see it coming now and plan accordingly, or discover it at year-end when the options for responding are more limited.
Ready to review your 2026/27 staffing cost position? Book a free consultation with Kudos Accounting today.
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