What you need to know (at a glance)

• 15% Employer NICs now apply once an employee earns £5,000 a year (previously 13.8% above £9,100).
• Employment Allowance has doubled to £10,500 and is no longer capped by total NIC liability.
• CGT under Business Asset Disposal Relief has risen from 10% to 14% in 2025 and will hit 18% in 2026.
• A mid-sized consultancy with 30 consultants on £50k salaries faces ≈ £18,000 in extra NICs every year.
• Integrated project-and-finance platforms (e.g. Projectworks) help model these costs in real time.

15 % Employer NICs: How labour costs rise

The most immediate impact for many firms is the increase in employer NICs from 13.8% to 15% and a reduction in the secondary threshold from £9,100 to £5,000. This means employers start paying NICs on a greater portion of salaries, and at a higher rate.

For consulting businesses, where payroll often accounts for the bulk of operating costs, this change can materially affect margins. For example, hiring a consultant on a £50,000 salary now comes with approximately £600 more in NIC costs per year. Multiply that across a growing team, and it becomes clear that scaling headcount could become significantly more expensive.

Firms may need to revisit how they balance their teams - looking at contractor vs. permanent mix, optimising for utilisation, or rethinking compensation structures. Having clear visibility of employee costs and their contribution to project profitability will be crucial in this environment.

£10,500 Employment Allowance: Why SMEs benefit

In more positive news, the Employment Allowance has been doubled to £10,500, and the previous cap of £100,000 in NIC liability has been removed. This is a welcome development for smaller consultancies, many of whom will now qualify for this relief and benefit from reduced employer NICs.

This change could free up thousands of pounds in annual costs - money that can be reinvested into growth initiatives like recruitment, technology upgrades, or professional development.

Smaller firms would do well to assess their eligibility and ensure they’re claiming this allowance. A structured view of payroll costs across the business makes this easier and helps identify the best areas for reinvestment.

14 % Capital Gains Tax: How exit strategies shift

Another important update for consultancy leaders is the change to Capital Gains Tax under Business Asset Disposal Relief (BADR). The tax rate has risen from 10% to 14%, with a further rise to 18% planned in 2026.

For consultancy owners planning a business sale or ownership restructure, these changes could affect the timing and structure of deals. While not an operational concern, it’s something that should be factored into medium-term planning, particularly for firms that are fast-growing or exploring merger and acquisition opportunities.

Firms with a solid handle on financial performance trends, project pipeline, and future earnings potential will be in a stronger position to plan their exit strategy or attract investment despite these changes.

Planning ahead: turning complexity into advantage

Tax changes are an inevitable part of running a business, but their impact can be managed with the right planning and visibility. What’s clear from the latest round of reforms is that financial agility - being able to model cost impacts, track performance in real-time, and adapt quickly is more important than ever.

Consultancies that react fastest share two traits:

1. Granular cost visibility: Knowing the fully-loaded cost of every consultant, including NIC, pension, and overhead.
2. Scenario planning capability: Testing “what-if” cases (e.g., hiring 10 more staff, changing day rates by 5%) before committing.

Many firms achieve this by consolidating project planning, resourcing, and finance into a single platform. Users of Projectworks, for example, can:

• Track live labour costs against NIC changes, project by project.
• Forecast cash flow with Employment-Allowance savings baked in.
• Model deal valuations under different CGT scenarios.

The result is faster, evidence-based decisions without the scramble when policy shifts.

Final thoughts

The 2025 UK tax changes underscore the importance of proactive financial management for consultancy and professional services firms. While increases to NICs present challenges, relief through the Employment Allowance and early awareness of CGT changes offer opportunities for those prepared to adapt.

Bottom line: Regulatory change is unavoidable; margin erosion is not. Firms with clear data, agile processes, and proactive planning will convert 2025’s tax headwinds into competitive gains.

If you're exploring ways to better track labour costs or optimise project profitability, it might be worth seeing how a professional services automation software like Projectworks can help. Book a quick demo to see how it works in action.