SMEs hit hard by National Insurance hike

Warnings are being given that the 1.25% increase in National Insurance rates which is to fund social care could deliver an extra hard blow to small business owners. The new rule will come into effect on 6th April 2022, at the beginning of the new tax year. The argument is that, not only will they be paying more NI themselves if employed, or more dividend tax if they pay themselves through dividends, but their businesses will also face a higher rate of NI on every employee. The Federation of Small Businesses has warned that more than 50,000 jobs in UK small businesses are at risk from the national insurance hike, which will cost British SMEs about £5.7bn and hurt the economic recovery Mike Cherry, national chair of the FSB, says the move is an “anti-jobs, anti-small business, anti-start up manifesto breach”. In his words “this increase will leave business owners and sole traders feeling “demoralised”, adding: “Business owners who have done all they can to retain and support their staff during the pandemic are now being punished”.

Source: FSB, Metro

The Startup Pack Comment: 

There is no doubt that this NI increase will hit SME’s and particularly start-ups hard just when they are working hard to establish, or re-establish, themselves. One big concern is that some may try to ‘fiddle the books’ or make changes to the way they employ people to avoid liability. It is imperative that proper advice should be taken in such cases to ensure that only legal options are adopted to reduce any tax liability.

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