Businesses fearful of NIC increase

The increase to the National Insurance contributions rate will cause more damage to the economy than any other measure introduced in this year’s Budget, claim UK businesses.

More than a third of firms (36%) are more fearful of the 2011 hike - from 12.8% to 13.3% - than any other change instigated in March by the Chancellor, according to the newly released results of a survey by UHY Hacker Young.

The accountancy firm said that the rise in NICs will cost employers and employees £4.8 billion per year, and the additional costs of hiring and retaining staff will deter businesses from taking on workers as the economy begins to recover.

The next most harmful Budget initiative identified by respondents was the 50% income tax rate for high earners, while the removal of pension tax relief for higher-rate taxpayers came third in the poll.

The measures risk encouraging the wealthy to leave the UK for lower tax jurisdictions, putting London’s position as a leading financial capital at risk, said UHY Hacker Young.

The final piece of Budget legislation identified as damaging to UK business was the increases in fuel duty to begin in September until April 2013.

It will affect all firms, hitting hauliers and logistics companies particularly badly, said UHY Hacker Young.

Tax partner Roy Maugham added, ‘This year’s Budget [did] very little to help businesses and will actually put them under increased pressure as the economy begins to recover.

‘A 4% increase in NICs might sound like small beer, but [it] will considerably add to the cost of taking on additional employees, while squeezing high earners will also put recovery at risk by encouraging wealth creators to leave the UK.’

Categories: News , Budget 2009 , Employees , Income Tax