Small and medium-sized businesses, from tech startups to hairdressers and cafes, will pay an extra £2.4bn a year due to the rise in national insurance, research commissioned by the Liberal Democrats has found. A breakdown of the figures suggests that small and medium-sized businesses in Orkney and Shetland will pay an additional £1.3m and £1.4m, respectively.
Boris Johnson broke his 2019 manifesto promise by raising employer National Insurance Contributions by 1.25%, impacting thousands of small businesses. House of Commons Library research has detailed the impact of this tax rise on small businesses across the country. It is estimated that the average micro-business employing up to 9 people will pay more than £1,000 extra a year as a result of the tax hike.
Ahead of the budget, the Liberal Democrats are calling for the Employment Allowance to be quadrupled from £4,000 to £16,000 for at least two years, meaning taxes on small businesses would be reduced by £5.5 billion next year.
Commenting on the figures, Orkney and Shetland MP, Alistair Carmichael said:
“The Tories’ broken promises on tax will create a bombshell for small businesses – and a needless drag on our local economy. It’s little wonder that voters are losing faith in the Conservatives to manage taxes.
“If we are to rebuild after the pandemic then we need to support businesses which have been hard hit and which will struggle to survive in the absence of a government that cares for their interests. Now is the time to reorient our economy to support the growth of smaller employers. I fear, however, that the current Chancellor simply does not understand the needs of small businesses. If the Chancellor truly cared about the success of local enterprise, he would cancel his plans immediately.”