Autumn Budget response: Own goal on growth as Chancellor NIC(k)s funds from UK businesses

Bruce Cartwright CA, ICAS CEO, said:

“The government’s manifesto commitment to rule out increasing the main levers for raising revenue has resulted in a mixed bag of measures.

“The announced increase in National Insurance Contributions (NICs) for employers by 1.2 percentage points to 15% and the drop in the secondary threshold at which businesses start paying this levy from £9,100 to £5,000, is ultimately an own goal on growth.

“It’s reassuring to see measures that support those on the lowest incomes, such as the rise in national minimum wage by 6.7% to £12.21 per hour, but it’s Britain’s businesses who will bear the brunt of offsetting these giveaways.

“Placing this additional strain on businesses at a time when many are already struggling with cashflow concerns and the challenging backdrop of changes to the Employment Rights Bill could be disastrous. Ultimately any increase in business operational costs needs to be paid for somehow. Firms are likely to compensate for the additional costs by limiting pay rises, freezing hiring plans and pausing employee benefits, or even paying a lower rate of pension contribution. These knock-on effects will directly impact working people’s wealth while stifling business growth.

“The fact that the smallest businesses will be protected by an increase in Employment Allowance to £10,500 from £5,000 takes the sting out of the tail for some. But this places an even greater burden on medium and large employers.

“The Chancellor committed to keep the current personal income tax threshold freeze introduced by the last government for the time being. However, the thresholds will be increased in line with inflation from 2028/29, meaning that for the next three years, as pay increases, more people will be pulled into the tax system and potentially into higher tax bands. An estimated million more people could be dragged into higher bands, effectively ‘picking the pockets’ of working people. This three-year freeze is an easy win for the Chancellor, but not the most transparent way of increasing revenue.”