Business groups warn over tax increases

Business groups have warned that the government's plan to raise national insurance contributions (NICs) and add a surcharge to dividend income will hamper the economic recovery.

08 Sep 2021

Business groups have warned that the government's plan to raise national insurance contributions (NICs) and add a surcharge to dividend income will hamper the economic recovery.

The government has announced a 1.25 percentage point increase in NICs to pay for increased spending on health and social care. It has also increased the scope of NICs to include retirees who continue to work, and there will be an additional 1.25% charged on dividend income.

Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said: 'Businesses strongly oppose a rise in NICs as it will be a drag anchor on jobs growth at an absolutely crucial time. Firms have been hammered by 18 months of COVID-related restrictions and have built up huge debt burdens.

'This rise will impact the wider economic recovery by landing significant costs on firms when they are already facing a raft of new cost pressures and dampen the entrepreneurial spirit needed to drive the recovery.'

Lord Bilimoria, President of the Confederation of British Industry (CBI), said: 'The national insurance increase will directly hurt a business's ability to hire staff at a time when businesses have faced a torrid 18 months and are now fighting crippling labour shortages.

'Government must be wary of heaping further pressure on businesses who will be central to the recovery, particularly by making it more expensive to recruit.'

Andy Chamberlain, Director of Policy at the Association of Independent Professionals and the Self-Employed (IPSE), said: 'After the financial damage of the pandemic, exclusion from support and the changes to IR35 taxation, this new tax hike on dividends will make it almost impossible for freelancers to continue to work through a limited company. To limited company directors – from project managers to graphic designers – this is salt in a year of wounds.'

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