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National Insurance increase may cause £3000 tax blow to small businesses
Star Harford • 2 February 2022
In April of this year, there is set to be a big increase in National Insurance rates. The Federation of Small Businesses have warned that this increase will push up small businesses and companies tax bills to an all time high from April 2022. As a result of this increase, small businesses will need to find ways to make back some of the lost money. They may find themselves in a position where they have to pass on the extra cost to their customers by increasing product or service prices, in order to afford the rise and also stay viable.
Boris Johnson and Rishi Sunak have confirmed on Sunday of this week that they will definitely be going ahead with a £12bn tax rise. This is despite the fact that many of their own party, and also the opposition, disagree and are asking them to scrap the idea. The Prime Minister has insisted that the rise is necessary and the right plan and that he will be pushing for it to go ahead. Him and Rishi Sunak said they are “tax-cutting Conservatives”, and he added “We are Thatcherites, in the sense that we believe in sound money. There is no magic money tree.”
For small or average sized businesses and companies that have employees, this tax rise could mean a £260 rise in National Insurance contributions every month. This would equate to an extra £3115 a year. This calculation is based on an average of 8 staff members per business. This will push up small businesses and companies' tax bills to the highest that they have ever been since the aftermath of World War II.
The National Insurance tax increase will come along at the same time as energy prices rise in the UK. The new gas and electricity price cap will also come into effect in April 2022, increasing the outgoings for any small businesses or companies that work from a premises. The two rises together, will not only result in consumer prices rising, but could also see some small businesses expenditure becoming too much for those businesses to remain viable. Some businesses and companies will therefore either be forced into debt or closure. Many of these companies will also already be suffering from the aftermath and continuing financial pressure of the Covid-19 pandemic.
Research from the Federation of Small Businesses shows that the expected increase in National Insurance will force around 80,000 companies in the UK to consider lowering their wages and make redundancies. For those companies hit the hardest, it may mean these companies will be forced to Liquidate. It is estimated that unemployment in the UK will rise by 50,000 as a direct result of this National Insurance increase and wages will be around £5bn lower than they are now.
If you find that your company is one of the many to end up in this position, and you would like to chat through your options, then you can fill in this online form. One of our experienced, specialist debt advisors will give you a call as soon as possible to discuss your circumstances. They will then offer you free, no obligation advice about what options you may have moving forward.
