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British employers are being forced to shoulder a £9billion tax hike after the government moved ahead on Wednesday with increasing National Insurance despite fierce opposition.

Company bosses said the 1.25 percentage point hike in National Insurance (NIC) contributions, which are paid by workers and their employers, would add to the already severe pressure of runaway inflation and soaring business costs this year linked to Covid, Brexit and Russia’s war in Ukraine.

“[The] The National Insurance hike is putting further cost pressure on businesses at a time when they can ill afford to bear it,” said Shevaun Haviland, chief executive of the UK Chambers of Commerce.

“Members tell us energy bills are skyrocketing as commodity prices hit levels many have never seen before. This comes with a huge increase in shipping costs and a compressed labor market.

UK employers set to pay an extra £9billion in national insurance contributions graphic

According to Treasury figures released in response to a Labor parliamentary question, the employers’ share is due to raise £8.8billion for the Treasury in the current financial year.

The brunt of the hike will be borne by key sectors including manufacturing, which faces additional taxes worth £900million. Employers in the health and social care sector will be taxed an additional £1billion, while those in wholesale and retail will face a similar increase and the construction sector will be landed with a bill of £400 million.

Jonathan Reynolds, the shadow business secretary, said the figures showed the government was not on the employers’ side. “The Conservatives’ decision to raise taxes during a cost of living crisis will make things even harder for businesses and families,” he said.

Reynolds said Labor would instead have launched a windfall tax on profits made by oil and gas producers amid soaring energy prices, which would be used to help small businesses with tax cuts. taxes and support for energy-intensive industries such as ceramics.

With inflation at the highest rate since at least the early 1990s, the government has faced heavy criticism from across the political spectrum for advancing the rise of manifesto-breaking NPIs

Designed to raise billions of pounds to fund health and social care, the move has raised questions about the timing amid Britain’s deepening cost of living crisis, with critics saying d Other options could have been pursued to raise funds.

Defending the plan on Wednesday, Boris Johnson said he had ‘absolutely no problem’ with the increase as it was ‘unquestionably the right thing for our country’ as the health service faced growing demand and struggling with a backlog built up during the pandemic.

However, employers’ groups have said it will inflict pain on businesses struggling to recover from Covid’s shock to the economy.

Martin McTague, national president of the Federation of Small Businesses, said it was a “jobs tax hike” that would hurt workers and employers. “The tax burden on small businesses is now at its highest level since the 1950s – a development that could not have come at a worse time, with soaring energy costs, cost inflation inputs, supply chain disruption and Covid-related absence of staff all taking their toll,” he said.

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Research from manufacturers trade group Make UK shows that up to 60% of industrial companies believe the rise will have a moderate or significant impact on their recruitment plans, while almost three-quarters say it will add to inflationary pressures which will be passed on to consumers.

“The increase in NICs is just one of many significant costs facing UK manufacturers and there will be a big question mark over whether the UK is a competitive place to do business at the moment,” said said a spokesperson for the group.

The Treasury said it was supporting workers and businesses with rising costs, including a tax cut worth £1,000 for half a million small businesses by boosting employment benefit – payroll tax relief – starting Wednesday.

Chancellor Rishi Sunak used his spring statement last month to offset some of the impact of rising inflation, including an increase in the threshold at which workers start paying National Insurance from £9,880 to £12,570 which comes into effect from July.

As well as an energy support package including a council tax refund and a loan scheme announced in February, Sunak announced a 5p cut in fuel tax rates, a £500m hike sterling from a household support fund and pledged to cut the basic income rate by 1 pence. tax in two years.

However, just £1 out of £3 of the measures announced by the Chancellor will go to the poorest half of the British population, according to the Resolution Foundation. The Institute for Fiscal Studies estimates that the National Insurance hike will yield around £17.2billion in total for the Workers’ and Employers’ Treasury, far more than the £6.3billion cut for workers benefiting from the change in threshold.

A government spokesman said he supported employers and workers. “No government can control the global factors driving up prices, but we will act where we can to support businesses,” they added.

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