The Government is pressing ahead with plans to hike taxes to pay for health and social care costs, meaning National Insurance will rise by 1.25 per
The Government is pressing ahead with plans to hike taxes to pay for health and social care costs, meaning National Insurance will rise by 1.25 percent from April. The hike has seen a lot of backlash from backbenchers as it backpedals on the Governments pledge to not increase taxes at the 2019 election.
Katie Cave, director at Clearpoint Finance said the increase could be “the straw that breaks the camel’s back” for small businesses.
She said: “Inflation, rate rises, and the pressures of paying for the Covid lifelines are chipping away at already stretched budgets leaving the small to medium-sized enterprise community on the brink.
“Pushing this back may not solve all the problems but at least it offers a chance for people to steady the ship ahead of the next storm.”
Both business owners and employees are already facing surging energy and gas prices, squeezing funds even further.
Once the new tax increase comes into effect in April, the average worker will pay an extra £255 annually.
Hargreaves Landsdown estimates the introduction of the levy will cost someone on a £30,000 salary an extra £255.40 per year.
Director at financial planners Rowley Turton, Scott Gallacher said delaying the increase would be “prudent”.
He said: “The government needs to exercise extreme caution before burdening UK employees and businesses with yet another tax rise.
“Given the many challenges the UK economy is facing at the moment with high inflation, soaring energy costs, new customs measures commencing and the Omicron variant, delaying the NI increase would be prudent.
“Otherwise, the government risks hampering the UK’s somewhat fragile recovery.”
Leader of the House of Commons Jacob Rees-Mogg was reported to have spoken out against the rise during a cabinet meeting earlier this month, saying it could not be justified.
A cabinet source told the Financial Times that Mr Rees-Mogg felt “finding the savings would be more frugal and responsible”.
Some business owners are calling for sectors less affected by the pandemic to step up.
Lucinda O’Reilly, director at The International Trade Consultancy said it “obvious” the money spent on the pandemic must be repaid but added: “Many sectors have done very well out of the pandemic so surely they should be asked to contribute more?”
She added: “When the increase to National Insurance was announced we were told it was to pay for social care, which most people agree is something that needs to be tackled.
“However, since then it appears that the money will go into the NHS budget rather than being ringfenced.
“It’s obvious to everyone that the £370 billion that’s been spent on the pandemic needs to be recouped at some point and that taxes will go up but with all the other pressures on individuals and business at the moment this seems like a blunt instrument at the wrong time.”
Kate Underwood, managing director at Kate Underwood HR and Training echoed these feelings saying the Government “needs to stop using the same brush for all”.
She added: “Some small businesses and support businesses, especially in hospitality, events and accommodation, are just about surviving. These increases could make or break them or make them have to lay off staff. There are some employers that have flourished in the pandemic and can help to support those that are most affected. Stop making it one rule for all and taking the easy option.”