How a Company’s value will change because of the imminent new NI charges

March 11, 2025

We have written a mathematical formula that provides an exact answer

With the new tax year now looming, one of the biggest issue companies are facing is the impact of the new NI arrangements on cashflows and profits.

The picture is different depending on the size of payroll because of the increased allowance which may mean that, net, companies with very small payrolls (probably micro businesses) will actually be better off. There will be a large group of small businesses for which the changes are neutral or only marginally negative.  For larger ones it will be costly.

This obviously impacts on value; one question we are asking of companies we are valuing is whether the forecasts have been adjusted for the changes in costs?

Many will not have done so or may only have made an approximate adjustment. In these cases we need to impair the value for the extra costs that will have to be paid over to HMRC.

Our team of analysts love this sort of challenge.  (Last month they worked out some very clever rock-solid maths to value companies in financial distress). This month they have designed a mathematical formula which proves beyond reasonable doubt how HM Government’s tax changes hit each and every business in the UK in terms of the equity value.   It is very clever and it works.  It will also be a useful tool we can adapt for other taxes as and when they change.

I can’t help wondering whether it could be used to create an overarching answer on to what extent the NI changes have impacted on the equity value of the entirety of UK Ltd? HM Treasury might be interested in that number, as it would be very useful for policy making, don’t you think?

Everyone has spoken a lot about how the tax rise is impacting on jobs and the costs to business, but as far as I am aware no-one has discussed what it has done to the Nation’s equity value. Perhaps working this out will be  a fun job to do when we have a spare moment!

If you would like a demonstration of how the calculations work, do let us know and we will set up a Teams call to run you through it.

If you have a company that needs to understand how tax impacts on value, we can help.

Otherwise, as always we are here for you and your clients around your valuation needs.  Please give us a call or email anytime.