UK businesses that employ staff. Minimum wage Their costs will see an increase of £2,367 per worker in 2025 due to pay rises. Tax I announced the increase Rachel Reeves‘ Budget, suggests new analysis.
With the overall tax burden reaching a new record high, the chancellor’s decision to raise rates National Insurance According to one think tank, paying by employers – and lowering the threshold at which it is paid – would make it more expensive to hire low-wage workers.
To defend The biggest tax hike in his first budgetThe New Labor government said the changes would raise an extra £23bn for the Treasury in 2025, helping to fund the NHS and support benefits such as the state pension.
But the move has angered some businesses, with some of the country’s biggest retailers warning that job losses are inevitable as a result of the tax hike.
New analysis from the Center for Policy Studies shows that it will cost an average of £24,806 for an over-21 to earn the minimum wage, which is £2,367 more per person than in 2024.
It will be partially driven. An increase in the national hourly minimum wage From April £11.44 to £12.21 – a £1,400 annual pay rise for a full-time worker on the National Wage.
But it will also come from employer national insurance rates rising from 13.8 per cent to 15 per cent next year, with payments starting when an employee earns £5,000, down from the current £9,100.
The budget increased pay for a total of 3.5 million minimum wage workers, with Ms Reeves increasing the minimum wage for 18 to 20-year-olds by £1.40 as part of a plan to close the gap between young and old. Also added. adult workers.
But budget-minded retailers including Tesco, Sainsbury’s, Boots and Next Signed an open letter to Ms. Reeves warned that the higher tax burden would cause them to raise prices and cut jobs.
However, many small firms will not pay any National Insurance this year as the Employment Allowance has risen from £5,000 to £10,500, leaving some businesses exempt from tax.
A new Center for Policy Studies analysis shows that for the average full-time minimum wage worker, 21.3 percent of total labor costs this year will be spent on taxes.
The think tank – founded by Conservative Prime Minister Margaret Thatcher in 1974 – said it would be 3.8 percentage points higher than in 2024, the highest ratio on record.
This includes national insurance for employers and employees as well as income tax.
“The more tax an employee owes on wages – whether paid by the employee or directly by the employer – businesses create jobs and The more expensive it is to maintain,” said Daniel Herring, CPS tax and finance researcher.
“By making it more expensive to employ people, increases in employer national insurance disproportionately affect the lowest paid or those seeking to return to work after being economically inactive.”
After reaching near-record highs under the Conservatives, the overall tax burden is now poised to reach new heights.
The Office for Budget Responsibility now projects taxes as a share of GDP to rise to 37.4 percent in the 2025-2026 fiscal year – surpassing the previous record of 37.2 percent in 1948, and 36.4 percent in 2022. Another is more than the nearest record. -2023.
On entering office, the New Labor government claimed A £22 billion “black hole” was left behind In public finance, after making a promise during the election campaign Not raising taxes on “working people”..
Additional reporting by PA