Act now to avert £800m hit to levelling up areas, small firms urge, with one month to NICs hike

  • 06 Mar 2022

The UK’s largest business group is urging the Government to help small employers with spiralling overheads as today (March 6) marks one month until an £18bn collective annual increase in dividend taxation and NICs for employers, employees and sole traders takes effect.   

FSB is recommending an increase to the targeted Employment Allowance – which entitles small employers to a discount on their NICs bills – to £5,000 to free up funds for investment and expansion. The group estimates that the intervention would cost less than £500m, or under 3% of the forecast tax take from the combined hikes.

Analysis from FSB shows that the planned 1.25 percentage point increase in employer NICs will add more than £3,000 to the annual tax bill of the average SME employer.

 

 

In the North West of England and West Midlands – where the Government plans to launch innovator accelerators as part of its levelling up agenda – the cost of the NICs increase to small employers is set to surpass £800 million a year.

On 1 April, the National Living Wage will increase to £9.50 for those over the age of 23. At the same time, business rates discounts for high street firms in England will drop in value and a lower rate of VAT for hospitality businesses will no longer apply.

Last month, the Office for National Statistics revealed that the growth rate of input prices paid by businesses producing goods has surpassed 13%.   

An FSB spokesperson said: “The Government’s levelling up plans are now at serious risk. The chilling impact of National Insurance hikes will hit the pay of those in regions that need help the most.

“Slamming small firms with a jobs tax hike will put the brakes on investment, upskilling and growth within communities most affected by the pandemic.  

 

“At its forthcoming Spring Statement, the Government can still make a difference by increasing the Employment Allowance to £5,000 and adopting our proposal to take an additional 200,000 small firms out of the business rates system in levelling up target areas.  

“Once we reach April, we’ll be faced with rising taxes, an end to business support measures and mounting inflationary pressure. The clock is ticking.

“The business community shrank in size by 400,000 in the first year of the pandemic. Unless the Government changes course, history is set to repeat itself.”    

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