MARTIN Lewis has questioned “who is going to pay” for Rachel Reeve’s Budget following the rise of employer National Insurance.
The Chancellor used the first Labour Budget in almost 15 years to raise £40billion from higher taxes targeting businesses, landlords, smokers and drinkers.
At its heart was a massive £25billion National Insurance raid on firms by raising the headline employer rate from 13.8 to 15 per cent.
At the same time, Reeves slashed the threshold at which employers start making NI contributions.
Employers currently pay National Insurance at a rate of 13.8 per cent on workers earning more than £175 a week or £9,100 a year – but this threshold is going to fall to £5,000.
The sum raised by the moves is the equivalent of around £800 per employee per year for each firm.
The founder of MoneySavingExpert.com has asked how businesses will pay for the increased costs.
The “trick and treat” Halloween package included:
- A freeze to fuel duty for a 15th consecutive year in a win for The Sun’s Keep It Down campaign
- A penny off a pint by cutting draught beer duty, but raising booze taxes on other drinks
- A gloomy forecast of sluggish growth in a blow to Labour’s flagship mission
- A stamp duty rise for second-home buyers of two percentage points
- A pay rise for millions as the minimum wage was increased by £1,400 a year
- A hike to a packet of cigarettes as smoking duties were raised
- A new tax on vapes ahead of the looming ban on disposable e-cigs
- Higher taxes on air passenger duty for private jets that hits the wealthy
- A benefits crackdown with Ms Reeves telling jobless Brits to “get back to work”
- An increase to the state pension of £473 next year through the triple lock
- An inheritance tax raid through freezing the rates people pay
- An increase to the Carer’s Allowance to give cash to 60,000 more carers
He wrote on X: “The change of threshold so employers now start paying National Insurance at £5,000 not £9,100 is big.
“For the employers who pay it, at the new 15 per cent rate that alone’s £615 increased cost per most employees per year.
“The question is where will that money come from, profits, increasing charges or reducing salaries/benefits?”
Some small businesses will avoid the hike as Reeves simultaneously increased the Employers Allowance for NI from £5,000 to £10,500 a year so those employing just a few staff will be exempt.
The controversial move comes after Labour’s party manifesto said it would not increase taxes on working people.
However, top economists have also warned that the chancellor’s National Insurance hike on bosses would ultimately be felt by their staff in reduced wage rises.
The Institute for Fiscal Studies (IFS) said: “Somebody will pay for the higher taxes – largely working people.”
Paul Johnson, director of the IFS, said: “The OBR suggests that three quarters of the impact of employer NICs will be felt by employees, even if the changes don’t show up on payslips.
“Indeed, these tax rises partly explain why the OBR has downgraded its projections for real household income growth over the next few years.”
The change is also set to make pension salary sacrifice schemes more attractive to employers.
Under this arrangement, employees give up part of their salary in exchange for other benefits such as pension contributions which are not subject to tax or NICs.
So we could now see more companies offering increased perks for forgoing wages to try to avoid some of the extra burden from increased NICs.
Ms Reeves made history as the UK’s first female Chancellor when she delivered Wednesday’s Budget.
In her speech she said the “prize on offer” is “immense”.
WATCH RACHEL REEVES ON NEVER MIND THE BALLOTS
By Ryan Sabey, Deputy Political Editor
RACHEL Reeves will be grilled in a special Budget edition of The Sun’s Never Mind The Ballots show today.
Our Political Editor Harry Cole will put the Chancellor on the spot shortly after she’s finished delivering her crucial address in the House of Commons.
It will be available to watch on thesun.co.uk, YouTube and Sun social channels at 5.30pm.
Topics will include her decision on whether to spare motorists a fuel duty rise, and the expected eye-watering tax rises she will impose.
Since its launch earlier this year, NMTB has cemented its place at the heart of British politics.
During the General Election campaign The Sun was the only print publisher to host back-to-back grillings of Rishi Sunak and Sir Keir Starmer.
Footage from The Election Showdown has been viewed over 15 million times.
NMTB has also featured interviews with ex-PMs Boris Johnson and Liz Truss, as well as senior politicians Nigel Farage, James Cleverly, Wes Streeting, Steve Reed and Bridget Phillipson
She laid out new funding to cut hospital waiting lists, pave the way for more affordable homes and rebuild crumbling schools.
Ms Reeves added: “More pounds in people’s pockets. An NHS that is there when you need it.
“An economy that is growing, creating wealth and opportunity for all.
“Because that is the only way to improve living standards.”
Harking back to the Labour governments of Attlee, Wilson and Blair, Ms Reeves said it is “not the first time that it has fallen to the Labour Party to rebuild Britain”.
The Chancellor warned that the tax hikes and borrowing increases she is considering may not be enough to undo “14 years of damage” to the NHS, despite plans to pump billions of pounds into the health service.
