Businesses’ national insurance contributions will rise from 13.8% to 15% starting in April 2025, according to Rachel Reeves.
In what she described as a “difficult choice,” she also reduced the existing £9,100 threshold at which companies begin paying national insurance on employees’ salaries to £5,000 instead.
The majority of the burden from the rise will be transferred to workers in the form of reduced pay and to consumers in the form of higher prices, according to the Office for Budget Responsibility (OBR), which keeps an eye on the government’s spending plans and performance.
It calculated that the average amount of time worked would be cut by 50,000 hours as a result of the national insurance increase.
The £40 billion tax increase is the biggest budget increase since the 1993 John Major administration and will more than cover the £22 billion “black hole” that Labour claimed the Conservative government left them.
Additionally, Ms. Reeves said that the income tax threshold freeze will expire in 2028–2029 and be raised in accordance with inflation thereafter.
Since the previous Conservative government frozen the thresholds, more people are paying higher tax rates as their salaries increase and they move into higher tax bands.
