National Insurance hike could hit 50,000 jobs
By Richard Wright | 13th September 2021
Raising National Insurance contributions for employers will lead to another 50,000 people out of work, it's claimed.
The Federation of Small Businesses (FSB) assessment of the potential impacts of a 1.25% increase in national insurance contributions (NICs) for employers, sole traders and employees indicates that the move could cause 50,000 more people to be left out of work.
The estimate is based on bringing together the Institute for Fiscal Studies (IFS)'s estimates of NIC rates, an international assessment of comparable employment cost increases, and the Office for National Statistics (ONS)'s latest labour market study.
The UK's largest business group warns that the impact on the jobs market could be even greater with the end of the furlough scheme approaching, a moment that has no precedent in labour market history.
As a result of the increase, annual Employer NICs for a small business with five employees on salaries of £31,000 will rise to £16,500. The total annual cost of the hike to the small business community is set to be £5.7bn.
The development comes as the Government's own figures show that just 640,000 small businesses will receive full protection from its planned Employer NICs hike thanks to the Employment Allowance.
Outside of the NICs increase, directors belonging to those 640,000 businesses will be impacted by a planned 1.25% increase in dividend taxation, also announced yesterday.
Commenting on the findings, FSB national chair Mike Cherry said: "The Government's regressive jobs tax hike will put jobs at risk, stifle start-ups and prevent new jobs from being created.
"It could mean 50,000 more people out of work after it takes effect in April. That means 50,000 livelihoods harmed - 50,000 people who would otherwise be at work in our economy.
"Combined with other rising employment costs - and firms having to make tough decisions about the futures of those who have been supported by the job retention scheme - that 50,000 figure could easily end up being a good deal greater."
The FSB urges the Government to protect small business owners, directors and sole traders from these hikes, starting with an increase in the Employment Allowance.
He added: "Taxing the small business owners and freelancers who serve our local economies, and who have endured a terrible 18 months, just at the moment when they're trying to get back on their feet will undoubtedly stifle efforts to recruit, retain and reskill over the critical years ahead, hampering our economic recovery in the round."
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