Add foreign-worker employer NI surcharge

Tax design

Reform's 2024 Contract proposed a 20% employer NI rate for foreign workers, compared with 13.8% for British citizens, with stated exemptions.

• Employer rate rises by 6.2 percentage points.
• Health and care are exempted.
• Reform claimed GBP 4bn a year.

Core trade-offs

The policy raises the cost of employing foreign workers and may encourage domestic hiring where substitutes exist. It also risks shortages, lower output and legal complexity.

• Treasury may raise extra employer NI.
• Foreign workers and exposed employers lose.
• Output falls where substitution is hard.

Illustrative fiscal impact

-GBP 5.0bn to +GBP 1.0bn. Central estimate: -GBP 2.5bn.

• Positive numbers mean public-finance pressure; negative numbers mean Exchequer savings.
• 20% NI rate is the main scale marker.
• Gross costs and receipt offsets are separated in methodology.
• Behaviour and pass-through widen the range.
• This is not an official costing.

Economic impact by 2027-28

• Jobs: Domestic substitution may rise, but vacancies and output losses are likely where skills are scarce.
• Wages: May lift wages in some roles; migrants may bear costs indirectly.
• Prices: Raises costs in sectors employing foreign workers, with pass-through likely.
• GDP / productivity: Likely negative if it reduces labour supply and high-skill migration.

Assessment

This is not simply a revenue measure. It taxes one group of workers through employers and could reduce labour supply in sectors where domestic substitution is limited. Receipts may be positive, but GDP and productivity effects are likely negative if the surcharge deters high-skill or shortage-sector workers.

Confidence: Low. The nominal rate is clear, but payroll exposure, exemptions, legal design and substitution make the range wide.

Main risks

• Shortage sectors: Exemptions may not cover all sectors where foreign labour is hard to replace.
• Legal complexity: Nationality-based payroll taxation may face legal, administrative and treaty challenges.
• Lower output: Reduced labour supply can lower GDP and other tax receipts.

Safeguards

• Publish sector-by-sector payroll exposure.
• Exempt roles on independent shortage evidence.
• Use training levies instead of nationality taxes where possible.

Academic evidence

UK government evidence

Sources

• PolicyLens illustrative scenario methodology: Add foreign-worker employer NI surcharge Internal - PolicyLens, 2026
• The Fiscal Effects of Immigration to the UK Academic article - Dustmann and Frattini, Economic Journal, 2014
• Migration Advisory Committee evidence base Official advisory report - Migration Advisory Committee, 2024
• The Cost of the Boriswave Party policy document - Reform UK, 2025
• Our Contract with You Party policy document - Reform UK, 2024
• Direct effects of illustrative tax changes Official tax data - HM Revenue and Customs, 2026
• The Impact of Immigration on the Structure of Wages: Theory and Evidence from Britain Academic article - Manacorda, Manning and Wadsworth, Journal of the European Economic Association, 2012
• Taxation and International Migration of Superstars Academic article - Kleven, Landais and Saez, American Economic Review, 2013
• Our Policies Party policy source - Reform UK, 2026

Other Reform UK policies

• Raise income-tax thresholds
• Cut household energy taxes
• Cut fuel duty by 20p
• Cut stamp duty below GBP 750,000
• Raise inheritance-tax threshold to GBP 2m
• Cut corporation tax to 15%
• Raise VAT threshold to GBP 150,000
• Abolish IR35 rules