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National Insurance Hike: A Mixed Bag for UK SMEs

The recent rise in employer National Insurance contributions has sparked a wave of uncertainty among UK SMEs. While some welcome the increased Employment Allowance, others worry about the impact on hiring and wages.

National Insurance

National Insurance

What’s Changed?

Employers will now pay a 15% National Insurance rate on salaries above £5,000 annually, up from 13.8% on earnings exceeding £9,100.

This change aims to generate an estimated £25 billion per year for the Treasury, funding crucial public services like the NHS.

The Good News:

The Employment Allowance, which reduces annual National Insurance liability for eligible employers, has been boosted from £5,000 to £10,500.

The Federation of Small Businesses (FSB) praises this move, stating it will provide significant relief for smaller firms.

Around 865,000 employers will be exempt from paying any National Insurance, while over a million will see no change in their current payments.

The Concerns:

Damon Hopkins, head of DC workplace savings at Broadstone, warns that this revenue-raising measure could have immediate consequences for most businesses, potentially leading to hiring freezes, salary cuts, and revaluation of employee benefits.

A Necessary Evil?

Shadow Chancellor Rachel Reeves acknowledges the burden on businesses but stresses the importance of funding vital public services.

The Bottom Line:

This National Insurance hike presents a complex picture for UK SMEs. While the increased Employment Allowance offers some relief, concerns remain about the potential impact on business growth and employee compensation.

The long-term effects of this policy change remain to be seen.

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