The Chancellor’s spring statement today was greatly anticipated, coming as it did at a unique and highly challenging time. Continuing Covid cases, significant rising prices, the energy crisis and the Ukraine war have all played their part in dampening down the ‘bounce back’ from the pandemic. In response, Rishi Sunak produced a number of measures including cutting fuel duty which he hopes will help over the months to come, though he also confirmed the increase in National Insurance will go ahead.
“Today’s spring statement comes after the announcement that inflation is at its highest for 30 years,” noted Neil Carberry, chief executive of the Recruitment & Employment Confederation (REC). “There are also many tax rises coming into force next month, and the war in Ukraine is causing further uncertainty. Now is not the time to be raising National Insurance, the UK’s biggest business tax. Raising the threshold for employees is sensible and will help to soften the blow, but 60 per cent of National Insurance is paid by businesses – this tax rise will place an extra heavy burden on them, especially in labour-intensive sectors like hospitality which are already struggling.
“The Chancellor’s cuts to fuel duty and business rates for retail, hospitality and leisure businesses are welcome,” Carberry added, “And his plan for incentivising business investment, including looking at the failed apprenticeship levy, sounds promising. But employers have been promised change before – this time, he has to deliver. It will require a real end to policy thinking being restricted to Whitehall. The recruitment industry is ready to come to the table and help government to ensure these new measures work.”
Elsewhere Crawford Temple, CEO of Professional Passport commented: “Whilst the Chancellor’s increase in the NI threshold will soften the blow for some, umbrella workers will still suffer as the income received by the umbrella covers the Employers National Insurance reducing the amount available for the workers pay. They then pay Employees National Insurance on their income, so he has not gone far enough to help all workers.
“It was also interesting to hear his plans to increase the employment allowance as the Government is still struggling to find and shut down mini umbrella companies,” he said. “The worry is that this latest move by the Chancellor will serve to further incentivise and motivate such firms to create more tax avoidance strategies. There was no reference to any increased resources of budget towards enforcement which is vital in ridding the industry of disguised remuneration schemes and it is not happening quickly enough in my opinion.
“It was also notable that the Chancellor made no reference to the Single Enforcement Body,” concluded Temple.
Finally Qdos CEO, Seb Maley, commented: “The Chancellor may have pulled a rabbit from his hat with the one per cent cut to income tax, but the reality is, by 2024, it could be too late. What’s more, this headline-grabbing measure will do little for limited company owners who slip through the cracks – just as they did during the pandemic.
“The cost of living crisis called for bold measures and so a £3000 rise in the national insurance threshold was a welcome and dare I say it, surprising development. It’s also one that will ease the pressure of rising costs for all self-employed workers, whether sole traders or limited company contractors.
“Having been hit hard by recent tax reforms, relieving at least some of the recent tax burden will come as a relief to small business owners who were likely fearing the worst,” said Maley.
