Dismayed business groups warn tax hikes will hurt recovery | National insurance


Business groups have reacted with dismay to the government’s national insurance hike and the dividend income surtax to increase spending on health and social care from next April, calling it a tax on employment and blow to economic recovery.

The British Chamber of Commerce (BCC) said the additional financial burden from increased tax burdens ignored the damage suffered by thousands of small businesses over the past 18 months.

In a separate attack on tax increases, the Institute of Directors accused the government of an opportunistic ambush, “exploiting public opinion to the detriment of some of the most productive and enterprising segments of the economy.” .

Boris Johnson said a 1.25 percentage point increase in national insurance for employees and employers would contribute to a £ 14 billion annual increase in health and welfare spending, to narrow the lists waiting times and prevent vulnerable people from using all their savings to pay social care bills.

Johnson said the scope of national insurance would be expanded to include retirees who continue to work, although the move would not bring in enough money. A further 1.25% dividend tax hike would mean that small business leaders would also be forced to back the reforms.

Big business was caught in the sights of Rishi Sunak in his budget last March when he announced the first corporate tax increase in 47 years.

The Chancellor raised the overall corporate tax rate, which businesses pay on their profits, from 19% to 25% on profits over £ 250,000 from April 2023, raising $ 47.8 billion pounds sterling by April 2026.

Suren Thiru, head of economics at the BCC, said the increase in national employers’ insurance was a further blow to the business world and “would be a drag on job growth at some point. absolutely crucial “.

Employers and employees pay national class 1 insurance depending on the remuneration of an employee. The rate is 13.8% for employers, while employees pay 12% of their income up to £ 50,000 per year. Anything over this amount is taxed at 2%.

“Businesses have been hammered by 18 months of Covid restrictions and have accumulated a huge debt burden. This increase will impact the broader economic recovery by placing significant costs on businesses as they already face a series of new cost pressures and curb the entrepreneurial spirit needed to drive the recovery. ”Thiru said.

Mike Cherry, director of the Federation of Small Businesses (FSB), said tax increases would demoralize business owners and independent traders “as they try to recover from the toughest 18 months of their lives. professional”.

“This increase will stifle recruitment, investment and efforts to upgrade skills and improve productivity in the years to come. At the same time, corporate executives, many of which have been excluded from pandemic support measures, face a new attack on dividend income, ”he said.

Kitty Ussher, the chief economist of the Institute of Directors, was scathing about the impact on independent traders, many of whom are forced to become small businesses to secure contracts with larger companies.

“The new surprise dividend tax will once again target the executives of small businesses,” she said.

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“The independent incorporated traders and other owner-managers, who relied on dividend income, were the only group of workers who were not supported by the government during the pandemic.

“Employees and the self-employed have received financial support to help them, but this group has not. “

She said the tax hike revealed “a complete lack of understanding of the very real difficulties faced by owners of Britain’s smallest businesses”.

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