NEWS: Small Businesses Fear Budget Tax Hikes

As reported by Yahoo News, small business owners warn that rising national insurance and wage costs may lead to employee cuts without government support

Small business owners have said they are “seriously concerned” by the prospect of tax rises in Wednesday’s Budget, with some fearing they will need to cut their employee headcount.

Chancellor Rachel Reeves is expected increase employer contributions to national insurance by at least one percentage point as the Government seeks to raise funds without hiking taxes on “working people”, as per its manifesto promise.

The government has already announced the national living wage, the minimum someone aged 21 and over can be paid, will also increase from April by 6.7% to £12.21 an hour while 16–20-year-olds will be paid £10 an hour – a 16.3% rise.

Small business owners said the combination of high costs over the past few years and the raising of the minimum wage and employers’ national insurance contributions will hit some businesses hard.

Michelle Ovens, founder of Small Business Britain – which champions the UK’s 5.1 million small businesses – warned more and more will fail if they continue to face this kind of pressure without help from the government.

Ms Ovens and Tina McKenzie, policy chair for the Federation of Small Businesses, both called for the government to increase the employment allowance to help relieve pressure and save businesses.

Companies with a national insurance bill of less than £100,000 a year can be exempt from paying the first £5,000 of employers’ national insurance contributions under a programme called the employment allowance.

Increasing the amount small business owners will be exempt from paying national insurance on would help soften the blow, they said.

Ms Ovens, from Small Business Britain, told Sky News: “Small businesses have seen high costs across the board over the last few years, so raising the minimum wage again will hit some, though not all, businesses hard.”

Ms McKenzie, from the Federation of Small Businesses, said: “Raising employer national insurance contributions at the same time as employers adjust to a higher national living wage is why the government should step up and significantly increase the employment allowance – reducing tax employers pay on wages is how you get sustainable rises staff actually feel in their pockets.”