Richard Maitland, head of national employment tax, MHA
• Companies to face a triple whammy of a rise in employer NICs, minimum wage and no cut in corporate tax this Parliament.
• MHA have calculated that average cost of employing someone on the minimum wage is up by 10%
• Very few levers for employers to pull to mitigate tax increases
• Company NIC increases ‘least worst option’
• Big rise in employment costs likely to deter corporates looking to invest in the UK

The Chancellor has announced a 1.2% increase in employers NICs and cut the threshold at which employers start paying the tax from £9,100 to £5,000. In conjunction with a 1.2 percentage point rise in National Insurance to take the employer rate to 15%, this will raise about £25bn a year.

After boxing themselves in on their election promises around no increase in income tax, NICs for employees and corporate tax the Government has had to find the money somewhere.

Whether you agree or not on whether this announcement breaches the manifesto pledge most UK companies won’t really care. What they are facing is a triple whammy of a rise in NICs, a significant jump in the statutory minimum wage (impacting some employers) and no prospect of a cut in corporate tax during this parliament.

Our calculations highlight that the costs for business of the average employee on the minimum wage have increased over 10% today.

Compounding this impact is that there are very few levers that employers can now pull to seek to mitigate these cost increases – although maximising the use of salary sacrifice may be one.

Offering some comfort for qualifying smaller businesses is the increase in the Employment Allowance, which will allow them to reduce their annual Employer NIC bill by £10,500, up from £5,000.

The news today follows hot on the heels of the government’s recently announced employment rights reforms which it has been estimated will cost businesses up to £5bn a year with the impact concentrated on low-paying sectors such as hospitality.

Clearly the Government will be hoping that the public will understand that the fiscal gap had to be filled somehow and as tax advisers we see why the NIC increase for business was chosen to do much of the heavy lifting in terms of revenue raising. It’s relatively easy to introduce and will probably be accepted by many as the least worst option.

But this big increase in the cost of employing people and creating new jobs sits uneasily with the laudable government focus on long term economic growth and is likely to give potential future investors concerns about coming to the UK.

Autumn Budget 2024