News

November 06, 2009

Business groups demand National Insurance freeze in Pre-Budget Report

Business groups have called on the Government to freeze planned increases to National Insurance contributions (NICs) in the upcoming Pre-Budget Report, writes Kate Horstead

The Chancellor is due to unveil the details of this year's Pre-Budget Report in the next month, although an exact date has yet to be announced.

However, business groups have already issued a number of demands, including that a planned increase in NICs in April 2011 is scrapped and that small business rate relief is made automatic for eligible firms.

A Federation of Small Businesses (FSB) spokeswoman, Sophie Kummer, said that if NICs are increased, small firms will be unable to afford to employ new staff.

"We are calling for a freeze on NICs, as an increase will make it harder for small firms to recruit more people," she said. "Small businesses have told us they want to employ more staff and are put off by the tax."

Entrepreneurial think-tank the Tenon Forum described this year's Pre-Budget Report as "the hardest ever" for the Government to produce.

"I don't think they are likely to announce a freeze to NICs," said the Tenon Forum's national head of tax, Andrew Jupp. "It would be quite costly and they would have to make increases elsewhere in order to pay for it.

"However, what we might well see is a reversal of the plans to withdraw the personal allowance for people with an income of over £100,000 a year," he added. "This change would create a fairer system for small-business owners taking a profit out of their firms. Otherwise, from April 2010, people with an income of between £100,000 and £112,000 will effectively end up with a 60 per cent tax rate."

Jupp said that the business rate relief proposed by the BCC may gain support from Government, because it would not be too costly to introduce. "It will cost a bit more in terms of admin, but it's relatively cheap when you balance it with the benefits it would bring to small businesses," he said.

Responding to the business groups' proposals, a Department for Business, Innovation and Skills (BIS) spokeswoman said: "We would like to ensure that businesses get the best deal in anything that is announced in the Pre-Budget Report to support them during the economic recovery."