The Changes Coming to Your Payroll
From April 2024, the National Insurance threshold for employers dropped from £9,100 to £5,725 per employee per year. This means you'll start paying National Insurance contributions on salaries earlier than before. At the same time, the rate itself increased from 13.8% to 15%. If you run a locksmith business with even a small team, these two changes combined represent a genuine hit to your operating costs.
Let's make this concrete. If you employ a locksmith engineer on £25,000 annually, you were paying around £2,115 in National Insurance. Under the new rules, that rises to approximately £2,900. That's an extra £785 per person per year. For a two-person operation, you're looking at over £1,500 in additional costs. For a larger firm with five or six engineers, the total could exceed £4,000 or £5,000.
Why This Matters More for Service Businesses
Locksmith services are labour-intensive. Your engineers are your biggest expense. Unlike a retail business that can spread costs across inventory and property, your payroll is the core of everything you do. You can't cut staff numbers without cutting service capacity. You can't reduce hours without losing revenue. The National Insurance rise therefore lands directly on your margins.
This is especially tough if you've already absorbed rising fuel costs, van maintenance, and tool expenses. Your operating margins in locksmith services are often tighter than they appear. Many owner-operators work on 20-30% margins after all overheads. The National Insurance increase can shave off 2-3 percentage points, which hurts.
How Other Locksmith Businesses Are Responding
You have three main levers to pull. None of them are painless.
Some locksmith firms have raised their call-out fees and hourly rates. A £5 increase on a call-out charge, or moving from £45 to £50 per hour, directly offsets some of the National Insurance burden. This works if your local market can bear it. Urban areas with high demand often can. Rural areas struggle with it more, because customers have fewer options but also tighter budgets.
Others have looked at their staffing structure. Rather than employing engineers as direct staff, some locksmiths use self-employed contractors for certain work. This removes you from the National Insurance hike entirely. However, you need to be careful about IR35 rules and tax treatment. A contractor who works exclusively for you and uses your van and tools might be deemed an employee for tax purposes anyway. The Revenue has been stricter on this in recent years.
A third approach is accepting the cost and absorbing it into lower profit for now, banking on price rises to follow once the market adjusts. This buys time but requires cash reserves to cushion the hit.
Planning Your Response
Start by calculating exactly what the changes mean for your business. You can use the HMRC National Insurance calculator to work this out precisely. Knowing the number removes some of the anxiety and lets you make proper decisions rather than reactive ones.
Look at your pricing. When did you last review your rates? If it's been over a year, a rate increase is probably overdue regardless of National Insurance. Market your increases clearly though. Customers understand that costs rise. What they hate is vague or unexplained price jumps. Tell them about materials costs, fuel, insurance, and yes, wage pressures.
Consider your employment mix. If you have apprentices, they're exempt from National Insurance contributions until they earn over £12,570 (as of the 2024-25 tax year). Bringing on a trainee locksmith could offset some of your National Insurance costs while building your future capacity. You get a wage subsidy through the apprenticeship levy too if you pay the monthly pay bill.
Review your cash flow assumptions. The National Insurance hits quarterly when you file PAYE. Budget for this in advance rather than being caught short. Some locksmith firms pay themselves quarterly bonuses, which can now be unpredictable. Plan for the new baseline.
The Bigger Picture
These changes weren't designed to hurt small service businesses. The government wanted to raise revenue and the threshold cut was meant to affect larger employers more than small ones. But reality is different. A locksmith firm with three employees faces genuine pressure. Larger corporate cleaning firms or nationwide plumbing chains can spread the cost across hundreds of people and absorb it more easily.
You're not alone in this. Every locksmith service, electrical contractor, plumbing business, and similar operation is facing the same squeeze. The trade bodies have made representation to government, though with limited success so far. For now, you have to work within the rules as they are.
The silver lining, if there is one, is that your competitors face the same costs. You all need to raise prices. Provided you time it right and communicate it clearly, the market will adjust. The locksmiths who struggle most will be those who sit still and hope it goes away.
Next Steps
Meet with your accountant before April if you haven't already. Work through the numbers for your specific situation. Decide whether you're raising prices, adjusting staffing, or some combination. Update your pricing lists and inform regular customers of changes in writing. Give yourself room to breathe during the transition period.
This isn't a disaster, but it is a real change that requires attention. Handle it properly and you'll be fine. Ignore it and watch your margins erode quietly. The choice is yours.
