Small business owners and employees are set to pay an extra 1% on national insurance contributions due to a growing social care problem.
The government is currently discussing whether to increase national insurance contributions for small business owners and employees, in order to fund the reform of social care.
According to the Times, the Treasury is deciding whether to up employer and employee national insurance contributions by one per cent.
At the moment, employers pay 13.8 per cent for their national insurance, whilst employees pay 12 per cent of their earnings.
Increasing national insurance contributions by one per cent for both employers and employees would raise over £10bn a year and may become dubbed as a new “health and social care levy”.
Initially, this additional money would be used to cut waiting times for treatments for the NHS, which currently sit at 5.3m patients and may rise up to 13m.
The money would then be spent to cap care costs, so costs are limited to £50,000 and families do not need to sell their homes and to plug growing gaps in care treatment.
Although it is a contentious matter, as increasing national insurance contribution affects people of working age, rather than those already retired.
On the 16th of July 2021 health secretary, Sajid Ravid, allegedly presented the proposed idea to the prime minister and chancellor, before later testing positive for coronavirus and sending all three into self-isolation.
However, many are unhappy with the proposal, with much outrage coming from small businesses.
National chairman of the Federation of Small Businesses, Mike Cherry, has commented that the decision to increase national insurance is “astonishing” considering the huge amount of damage that small businesses have suffered over the last 16 months.
Cherry said: “The government cannot be serious about a strong economic recovery if it thinks hiking the jobs tax is a good idea … it is astonishing that just 24 hours after many businesses were able to re-open, ministers think now is a good time to land small firms with this bombshell.”
Cherry believes that the last thing the government should be doing is increasing the risk of an unemployment surge just as the job retention scheme is coming to an end. If the government goes back on its promise to not increase NICs, then this would shatter trust among small firms and sole traders which is vital for the economy’s recovery.
On the 19th of July 2021, Boris Johnson refused to recommit to his 2019 promise to not increase national insurance or income tax.
When the Sun asked if the government planned to stick to its pledge not to increase taxes, the prime minister was evasive: “On the long-awaited plans to deal with … social care, a problem that has bedevilled governments for at least three decades… you’ve just got to wait a little bit longer.”
Are you a small business owner? Do you know how much it’s worth? Find out instantly for FREE with our online Valuation Tool.