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More than 750,000 low-paid hospitality workers in hotels and restaurants will become part of the national insurance system because of changes made by the Budget, a trade group has warned.
Chancellor Rachel Reeves said at the Budget last year that she will raise employers’ national insurance contributions in a bid to raise £22bn for the Treasury.
She also said that she would lower the threshold for paying the tax, from earnings of £9,100 per year to £5,000 per year, meaning hundreds of thousands of people’s employers will now pay the rate.
Kate Nicholls, chief executive of UK Hospitality, said “The change to employer NICs is one of the most regressive tax changes ever.
“The scale of this change is unprecedented, bringing three quarters of a million people into this employer tax for the first time, and the extent of the impact will be enormous.
“At a time when we saw hospitality as the biggest driver of economic growth in November, it’s completely misguided to be punishing a sector that has such growth potential.”
Ms Nicholls warned that this change to national insurance in the Budget could cost the hospitality industry £1billion.
Employers have already warned that they will have to raise prices to deal with the increase outgoings, as well as the planned rise in the minimum wage.
Brewer Young’s said last week it will lift its prices by 3.5 per cent following the chancellor’s plan to increase tax on businesses.
The move will add about 20 pence to the price of a London pint, taking it to about £6.50. A pint in the rest of the UK will be about 17 pence more.
The trade body earlier estimated that national insurance and minimum wage hike will add £2,500 to the cost of employing a full-time staff member for its members each year.
Last week, research suggested that two thirds of the nation’s top retailers will have to raise prices too.
The British Retail Consortium, whose members include giants like Marks & Spencer and Boots, said 67 per cent of the 52 finance bosses they surveyed said they would raise prices in response to increases in employers’ National Insurance Contributions from April.
Just over half said they would be reducing their paid number of hours and overtime, while 46 percent said they will have to reduce staffing numbers in stores and 31 per cent said the increased costs would lead to further automation.
A Treasury spokesperson said: “Without our action, business rates relief for retail, hospitality and leisure would have ended completely in April this year.
“Instead, we are protecting one in three businesses from paying business rates, extending 40 per cent relief for 250,000 properties in retail, hospitality and leisure and introducing a new permanently lower business rate in 2026, while more than half of employers will either see a cut or no change in their National Insurance bills.”
“Our Plan for Change will also get Britain building, unlock investment, and support business so we can make all parts of the country better off.”
