Somerset employers raise concern over tax increases
Businesses warn of redundancies as a result of National Insurance hikes
Businesses in Somerset have voiced their concerns regarding increases to employers' National Insurance contributions.
The chancellor Rachel Reeves announced the tax hike in the Autumn Budget.
It has been estimated that the total tax bill for employers across the country will go up by £13.6billion a year, equal to £900 more towards the cost of every member of staff, based on average earnings.
In a survey conducted by Somerset Chamber of Commerce, 96% of respondents said they were either somewhat or very concerned by the increase, which is due to take effect in April.
Some employers even warned they may have to make redundancies or keep posts vacant to make up costs.
David Crew, Managing Director of Somerset Chamber, said: “It is clear from the evidence that increasing employers’ National Insurance contributions from 13.8% to 15% is going to have a significant negative impact on our business community.
“Many will be forced to pass on the additional costs to customers, others are already planning to scale back operations to save money.
“Businesses completely understand that taxation and investment in public services is vital. But the view of many we talk to is that the Chancellor’s last Budget was just a blunt taxation tool that has been inflicted on employers in what is already a challenging economic climate.”
Keith Sinclair, Chief Executive Office of Bridgwater-based charity Brainwave, which supports children with disabilities, said the changes would add £6,000 a month to the charity’s costs - £70,000 a year.
He said the impact would be felt across the board: “We are a charity that generates all our income through fundraising and our charity shops. Like for-profit businesses, we face immense financial pressures—if not more—yet we lack the ability to pass these rising costs on.
“Charities like ours are filling the gaps left by an overstretched and underfunded health, social care, and education system, yet instead of being supported, we are being penalised for our efforts.
“To cover these additional costs, we must either raise an extra £70,000 a year in unrestricted income—an enormous challenge in today’s economic climate—or make significant cuts.
“It is incomprehensible that the Government refuses to consider concessions for the charity sector.”
The impact of the increase is likely to be particularly felt by smaller businesses. Lizzie Tottle, Director and Founder of brand growth agency Teapot Creative near Hambridge, said the National Insurance changes would have a negative impact on investment and cashflow and add an additional cost to the business of almost £1,000 a month.
She said: “This is yet another significant barrier to owning a business. It seems to get harder every year with more and more burden enforced by the Government, with little reward or incentive to grow business or employ more people.”
And the intention of so many businesses to potentially freeze recruitment is a real worry for those working in the recruitment sector.
Dr Shelley Poole, Founder of Wellington HR, said: “I am concerned not just about the direct impacts on our wage bill, but the potential wider slowing of the economy resulting from lack of recruitment and investment.
“We are HR Consultants and have seen some clients are cutting back on recruitment as a result of this. This in turn affects the work we do, and so our turnover may be impacted as well as our wage bill.”
Somerset Chamber will use the findings of the survey to lobby central Government.
An HM Treasury Spokesperson said:
“We delivered a once-in-a-Parliament budget to wipe the slate clean, and now we are focused on going further and faster to kickstart economic growth so working people have more money in their pockets.
“By bringing back political and financial stability, we are creating the conditions for economic growth. We have also ensured 850,000 businesses will either pay less or no employer National Insurance at all next year, more than half of employers see no change or gain overall, and employers will be able to employ up to four full-time workers on the National Living Wage and pay no employer NICs.”