Starting from this week, businesses in the UK will have to pay more in National Insurance to fund public services. According to Chancellor Rachel Reeves, more than half of the £40bn total tax rise in the Budget will be paid for by businesses through increasing the National Insurance rate and reducing the threshold at which employers start paying it. While there will be some exemption for the smallest businesses, larger corporations worry about the impacts of increased costs on their ability to create new jobs or offer pay rises. Leading business groups have called the budget choices nothing but “pain” resulting from increased minimum wages, business rates, and worker rights under new laws.
The Office for Budget Responsibility estimates that employers are likely to pass on the increased costs to workers and consumers through lower wages and higher prices, which could ultimately impact tax revenues and economic growth. Although Reeves affirmed the only way to drive growth was through investment, many small, independent companies could be hit harder by these new taxes than larger, multinational corporations.
Larger firms may be able to absorb the extra costs of adapting to new workers’ rights under new laws and paying higher minimum wages, but smaller firms may bear the brunt of these tax hikes. The CEO of UK Hospitality, Kate Nicholls, warns these tax rises would be a “brake on growth” for the UK. Reeves, however, promised the government is pledging to be both “pro-business” and “pro-worker” in all policy decisions and that Income Tax, National Insurance for employees and VAT would not be increased.
While businesses grapple with the tax rise announcement and its impact, the Government is trying to provide some relief to small firms, by uplifting the amount they can claim back from their National Insurance bill. However, the 75% relief on business rates, which are charged on most non-domestic properties such as shops, offices, pubs and factories and were due to expire in April, will be replaced by a 40% discount for retail, hospitality and leisure companies next year
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