UK Prime Minister Boris Johnson is expected to raise National Insurance (NI) by 1.25% which has prompted a furious backlash from MPs and business leaders, as it goes against the PM’s key election promises.
The NI hike is a part of Johnson‘s vow end “catastrophic costs” for social care users in England.
Federation of Small Businesses (FSB) responded to the 1.25% increase in National Insurance Contributions (NICs) for employers, employees and sole traders alongside a 1.25% increase in dividend taxation.
FSB National Chair Mike Cherry said, “These hikes will have business owners and sole traders feeling demoralised at the point when they’re trying to recover from the most difficult 18 months of their professional lives. For those thinking about starting up, they send completely the wrong message.
“Business owners who have done all they can to retain and support their staff during the pandemic are now being punished for that loyalty with an £11bn increase in NICs, which essentially serve as a jobs tax.
“This regressive levy hits employers and sole traders without meaningful regard for how their business is performing. And this increase will stifle recruitment, investment and efforts to upskill and improve productivity in the years ahead.
“At the same time those running companies, many of whom were left out of pandemic support measures, face a fresh assault on dividend revenue.
“It’s extremely disappointing to see the Government undermining the good work it did last year in raising the Employment Allowance to provide some protection for small employers.
“Instead of breaking manifesto promises, we had hoped this administration – which has repeatedly pledged its support for small enterprises – would build on that progress against a backdrop of spiralling input prices, skills shortages, supply chain disruption, the reintroduction of business rates and emergency loan repayments.
“This move marks an anti-jobs, anti-small business, anti-start up manifesto breach. The Government should now increase the Employment Allowance to mitigate the damaging impacts of these hikes on the small firms that make-up 99% of our business community.”
FSB London Policy Lead, Rowena Howie added, “Small businesses are the solid ‘backbone’ of the London area economy and have been badly damaged as a result of the pandemic. This army of businesses that make up 99.3 per cent of all private sector businesses in the capital need continued support to ensure recovery and growth, and not ‘anti-small business’ tax hikes.
“The cost of doing business in the capital is already high and confidence lags behind the rest of the UK as recently highlighted in our latest Small Business Index report.
“Small businesses including start-ups need a morale boost in these current times and not the news announced today by Government”.