National insurance hike adds to small business stress

The government’s expected 1.2 per cent hike to national insurance contributions would deliver a sharp blow to small businesses and sole traders, the Federation of Small Businesses (FSB) has warned.

Ahead of the government’s official announcement, FSB chair Mike Cherry commented on the impact it would have on job creation and SME viability.

“Breaking a manifesto promise by increasing NICs just at the moment when firms are struggling to get back on their feet would be devastating for small businesses and the local communities they serve,” Mr Cherry said.

“NICs act as a jobs tax, making it harder for small firms to provide opportunities and invest to improve productivity. If this hike happens, fewer jobs will be created by the UK’s small business community over the crucial months ahead.”

Mr Cherry categorised the levy as regressive, noting that it added to the stress small businesses were already facing with input prices spiralling, supply chains disrupted, a deepening late payment crisis, rates bills returning, skills shortages and emergency loan repayments stacking up.

He said the government was aware of the strain that national insurance contributions placed on employers, which was why last year it increased the employment allowance to £4,000, alleviating some of the burden.

A rise in national insurance contributions would effectively undercut the aid the government had provided, Mr Cherry said.

“The measures put in place by the government are already aiding job creation at the point when help is most needed. This mooted tax hike would reverse that progress when policymakers should be looking to build on it, with a further £1,000 uprating of the Employment Allowance,” he said.