Whilst maintaining the rate of national insurance (NI) contributions was a key element of the Labour parties’ manifesto, it seems they are not scared to break this promise. Following her keynote speech during the international investment summit earlier in the month, Chancellor of the Exchequer Rachel Reeves has given some very strong hints that she is looking to increase employer NI contributions in the budget.
If Reeves chooses to do this, it will significantly impact businesses across the UK. If businesses are forced to shoulder increased NI contributions, it would mean increased costs per employee. This means it would be more expensive to maintain or expand the workforce. Many businesses will be deterred from hiring new staff given the increased expenses and tighter profit margins, and impact growth strategies.
An impact of this could be businesses looking to cut costs elsewhere in the business to make up the shortfall, potentially reducing employee benefits, halting wage increases and stopping investment in training and development programmes. In an even worse situation, businesses could look to reduce the workforce and therefore overhead costs as owners try to maintain profit levels.
Alongside this potential increase, is the suggestion that businesses within the public sector will be exempt from this increase – namely government businesses. Yes, many in this sector are struggling, but so are the majority of businesses across the UK generally. To create an exemption for some businesses over others is not only incredibly unfair, it is once again highlighting how those associated with the government feel they are above the rules that are placed on everyone else in the UK.
To find out how moving your business offshore could help mitigate these potential increases, find out more on our offshore formations page and get in touch.