NI hike in question ahead of Spring statement
With chancellor Rishi Sunak set to deliver his spring statement on March 23, many commentators have questioned whether he will push ahead will the planned increase in National Insurance Contributions.
As it stands, there will be a 1.25 percentage point increase from April, though the UK's rapidly rising inflation could mean this is deferred.
Matthew Johnson, associate partner at accountants and business advisors WNJ, said: "The signs coming out from government sources so far is that there will be no U-turn and with the rise forecast to raise around £14bn per year, you can see why the chancellor will be reluctant to give that up.
"However, postponing the increase would be widely welcomed as a way of easing some of the pressure currently facing businesses. The noise around this is likely to get even louder as the spring statement gets closer."
And while the spring statement is not usually a time for major policy announcements, Matthew believes that warning signs looming over the economy could force Rishi's hand.
He added: "Small businesses are really feeling the squeeze. Business confidence is starting to waver. Inflation is running at more than five per cent and is set to rise even further. Gas and oil wholesale prices have rocketed. The Office of National Statistics (ONS) latest study reported that five per cent of business owners ‘have low or no confidence of surviving the next three months.
"It’s not a great picture and we are seeing some ominous warnings around growth and economic recovery. There is a feeling that something must give. The spring statement is not usually a time for major policy announcements or movements in areas like tax, they are normally dealt with in the autumn Budget.
"However, with the economy and individual businesses feeling the strain, the chancellor is being urged to use this statement as an opportunity to provide support on several fronts."
One of the key areas the chancellor may act is tackling rising oil and gas prices. Matthew says: "We’re unlikely to see any windfall tax on oil and gas companies, something the Labour opposition has been very vocal in promoting.
"However, there are other options available to him. With fuel costs soaring at the pumps and reaching record levels, could there perhaps be a cut to fuel duty? A temporary reduction to the duty on diesel would be widely welcomed by businesses. The chancellor could also look at cutting the mileage recovery rates that determine the amount of fuel per mile employees can expense without paying tax."
Tony Medcalf, tax partner at MHA Moore and Smalley, believes the chancellor may act to boost confidence in the markets. He said: "The situation with Ukraine may see the chancellor take action to reassure the public and the markets. For example, I wouldn’t be surprised to see some intervention to urgently accelerate the supply of renewable energy in the UK and improve the security of energy supplies however that may be done.
"I have seen calls from some business groups for the chancellor to provide clarity on what will happen to the super deduction on new plant and machinery with the tax break due to end in March 2023, but I think it’s more likely that will wait until the budget in the autumn."
Matthew Johnson of WNJ added: "We’re also seeing calls for a range of measures specifically targeted at small businesses, to ease the pressure they are feeling. For instance, the Federation of Small Businesses (FSB) would like to see a rise in the Employment Allowance to £5,000. The group would also like to see a rise in the rateable value ceiling for small business rates relief to £25,000 and the extension of the one-year relief on business rates increases linked to property investments in plant and machinery.
“We have also seen speculation that the Treasury would like to scrap the R&D tax credit incentive for small research-intensive businesses in favour of supporting larger companies. That would be a really unpopular move and send out a signal that the government is only interested in the fortunes of the corporations and big businesses."