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National insurance increase to damage employment

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The pre-budget report has announced that National Insurance (NI) payments for employees earning over £20,000 a year will rise by 0.5% from April 2011.

Chancellor Alistair Darling has enforced the change in an attempt to tackle the country’s spiralling decent into debt but has vowed to keep low earners and the unemployed safe from increased taxes.

Currently, 11% of most workers’ salaries are handed over in National Insurance payments and, in previous projections, Darling had announced the rate would increase to 11.5%. This week’s pre-budget will see that figure rise to 12% and will raise an estimated £3.4bn a year for the Treasury.

The increase means that a typical employee, earning around £25,000 annually, will pay an extra £200 in National Insurance.

The controversial budget has been denounced by a series of financial experts and workers alike, with many claiming such a rise will discourage job creation. Employers will now have to fork out an extra 1% in tax for every additional employee, up to 13.8% from 12.8%.

The self-employed will see their NI contributions increase from 8% to 9% and, with the 50 per cent tax rate for the richest workers taking effect from next year, anyone earning £150,000 or more will find themselves paying more than half their income as tax, on top of the increase in NI.

Commenting on the increase, John Wright, the Federation of Small Businesses (FSB) National Chairman, said: “Raising National Insurance by a half of one per cent in 2011 is an attack on jobs and shows a real lack of vision from the Government on tackling the key challenge of rising unemployment.

“In a survey of FSB members this year, 44% said a cut in payroll taxes would help them take on more staff, so this is extremely damaging for employment in the UK.

“While unemployment continues to rise, it is unaccountable that the Government hasn’t considered a new approach, such as a National Insurance rebate for new jobs in small firms. This pre-budget report should have encouraged and rewarded job creation in 2010, rather than imposed this tax.”

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Written by Andrew Hodges

December 14, 2009 at 10:37 pm

Posted in Comment, LinkedIn

Tagged with , ,

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