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Jobs tax increase would hit small businesses and young earners

Prime Minister Boris Johnson’s expected announcement of a 1 per cent increase in national insurance contributions has caused concern among small business owners.

Jobs tax increase would hit small businesses and young earners
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  • Juliet Helmke
  • July 22, 2021
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The tax hike, which has not yet been formally announced, would fund an overhaul of the UK’s social care system and address the long hospital backlogs precipitated by COVID-19.

Expected to raise approximately £10 billion per year, it will be levied against both employers and employees.

National chair of the Federation of Small Businesses (FSB) Mike Cherry commented on what he saw as poor timing of the tax hike, noting small businesses were grappling with a number of changes this week alone.

“It is astonishing that just 24 hours after many businesses were able to re-open, ministers think now is a good time to land small firms with this bombshell,” Mr Cherry said.

“After the huge amount of damage wrought to businesses over the last 16 months, the government cannot be serious about a strong economic recovery if it thinks hiking the jobs tax is a good idea,” Mr Cherry said.

Even with the announcement not yet official, Mr Cherry observed small business owners already weighing up their options for the future, calculating how many employees they could keep on under the potential increase. 

It comes as they’re also considering how to manage after the furlough scheme winds down.

“To hike them as the furlough scheme and wider support measures end would stop our economic recovery in its tracks before it’s even started,” Mr Cherry said.

Independent think-tank the Resolution Foundation, which is focused on improving the living standards of those on low-to-middle incomes, raised similar concerns about raising national insurance contributions.

While stressing the need for increased funding for the NHS, the think-tank released a publication authored by CEO Torsten Bell and economist Adam Corlett this week, stating that “raising National Insurance is a terrible way to go about [funding social care]”.

“It asks younger and lower-paid workers to contribute more than older and wealthier people, compared to a fairer rise in income tax,” Mr Bell and Mr Corlett said.

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