Sorry, Lionel Richie. Businesses aren’t feeling easy like a Sunday morning. The new tax year is here. And Chancellor Rachel Reeves’ £25bn national insurance tax raid has fallen on thousands of firms. 

From today, employers will pay a tax rate of 15 per cent on salaries above £5,000, down from £9,100 previously. 

This secondary threshold for employers’ national insurance contributions (NICs) will remain frozen for three years and then it will increase in line with inflation. 

The changes mean nearly a million employers will pay more NICs, with the proceeds contributing to higher government spending on the NHS and education. 

There are various measures swirling around on just how much more tax this hike means for employers. ING’s James Smith claims that firms paying employees an average salary face a 27 per cent increase in the amount of tax paid. 

The brutal hike to NICs remains an “unknown” on many fronts for firms’ balance sheets.

 “Survey after survey have shown it has lowered hiring intentions,” he said. 

Any summary of surveys published in recent months will be heavy death music to Reeves’ ears. 

A brief overview would go something like: fewer firms are planning to add staff (REC and KPMG), fewer mid-sized firms believing the UK is pro-businesses (Business Leader) and 300,000 companies planning to lay off workers (Iwoca). 

These figures have worried, among others, the Bank of England. Its Monetary Policy Committee said the overwhelming evidence of low confidence among businesses “suggests weakness in growth”. The Bank slashed its growth forecast in half in February from 1.5 per cent to 0.75 per cent. 

‘Costs will have spiralled by £7bn’

One of the hardest hit sectors will be retail, which employs some one and a half million part-time workers. This is a drop of 200,000 since 2018 but taxes are could now send the number of part-time workers further downwards. Representatives at the British Retail Consortium (BRC) say the changes will cost firms more than ten per cent more on average as entry-level roles come under greater strain.