UK Government Expected to Announce New Tax Rises: Employers' NICs in the Crosshairs?
The new UK Government is reportedly planning a series of tax increases, and speculation is rife about where these will fall. It seems likely that these changes will target a variety of areas beyond the more visible taxes such as VAT, income tax, and personal National Insurance Contributions (NICs).
One area that may face an increase is employers' NICs, which could rise from 13.8% to 15%, potentially generating over £10.5 billion annually. Current UK statistics suggest that each 1% increase in employers' NICs yields an additional £8.7 billion for the Treasury, making this a tempting target for any government seeking to boost revenues, and taking it to 15% makes a nice round number.
However, raising employers' NICs is not without its drawbacks. As a tax on jobs, higher NICs can discourage hiring and slow economic growth. The principle is simple: the more you tax something, the less you get of it. Nevertheless, with Rachel Reeves and Sir Keir Starmer highlighting the challenging economic situation they have inherited, it makes sense for the new government to maximise its fiscal headroom now.
While we will have to wait until October for the Government's full announcement, employers can start preparing now. Traditional responses include raising prices, reducing headcount, or improving efficiency. However, there are also innovative strategies available to manage payroll costs more effectively.
At GBMM, we have been developing a range of solutions to help businesses significantly reduce payroll expenses. One of our products rebates on payroll costs—which can reduce total payroll expenses by as much as 6.1%, even before any increase in employers' NICs is factored in. These rebates are paid monthly, and this could make a significant difference to some businesses total expense and cash flow.
For assistance with understanding if this type of business solution is suitable for you, reach out to Nick Heron at GBMM (nick@gbmm.uk). We are here to help you adapt to these changing economic conditions.