Rachel Reeves's 'jobs tax' means workers face hit of up to £11,000 over next five years

'National Insurance rise would be another blow to small businesses,' says Lib Dem deputy leader
GB NEWS
James Saunders

By James Saunders


Published: 07/04/2025

- 12:28

Updated: 07/04/2025

- 15:19

New research warns that the average employee will be worse off by almost £3,000 by 2030

Workers are facing a hit of up to £11,000 over the next five years due to Labour's employer National Insurance contributions hike, new analysis has warned.

The tax increase, which came into effect on April 6, is set to significantly impact wages across the country - and new research warns that the average employee will be worse off by almost £3,000 by 2030.


The analysis, conducted by the Liberal Democrats, warns that most of the tax burden will be passed on to workers through lower real wages - however, the Treasury has said it "does not recognise" them altogether.

Yesterday, the rate of employer NICs rose from 13.8 per cent to 15 per cent as part of the Treasury's plan to raise around £25billion every year.

Rachel Reeves

Workers are facing a hit of up to £11,000 over the next five years due to Labour's employer National Insurance contributions hike

PA

The Chancellor has also reduced the threshold at which businesses become liable to pay NICs on employees' earnings.

Business leaders have long warned of devastating impacts from the tax hike - with many firms said to be at risk of closure due to the increased costs.

Of the £25.7billion hit to firms from the Chancellor's tax increase in 2029/30, around £19.5bn would be passed on to workers - which individually works out at nearly £470 in the next year.

Every local area will see employees at least £2,100 worse off by the end of the decade due to the NICs rise.

Kensington and Chelsea was identified as the worst-impacted area in the country, with employees facing an average hit of £10,800 by the end of the decade.

LATEST ON LABOUR'S NATIONAL INSURANCE RAID:

Kensington and Chelsea street sign

Glitzy Kensington and Chelsea was identified as the worst-impacted area in the country

PA

Some 60,043 payrolled employees in the London borough are forecast to be hit by a combined £649million due to the NICs rise.

The City of London follows closely behind, with workers facing an average hit of £10,469 over five years.

Westminster (£8,353), Camden (£6,781), and Elmbridge (£6,635) complete the top five most affected areas.

The research paints a picture of what the Lib Dems have labelled a "grim reality" of the impact on workers' pay packets.

Liberal Democrat MP Daisy Cooper, the party's Treasury spokeswoman, said: "The Chancellor is risking an epidemic of boarded-up shop fronts and household finances taking another battering in the midst of a cost of living crisis.

Daisy Cooper

'For the Government to pretend that this tax hike will not impact people's pay packets is a complete deception,' Daisy Cooper said

PA

"These figures lay bare the grim reality of the Chancellor's jobs tax. For the Government to pretend that this tax hike will not impact people's pay packets is a complete deception."

"It is employees and our high streets that will pay the price for this growth-crushing policy."

The Office for Budget Responsibility reported last month that 76 per cent of the rise in employer NICs would be passed down to workers through lower real wages - in the face of Labour's pre-election promise not to "increase taxes on working people".

A Treasury spokesman said: “We do not recognise these figures.

“Getting more money in working people's pockets is a priority for this Government and our Plan for Change means living standards are already growing at their fastest rate in two years, thanks to measures such as the increase to the national minimum wage and extension of the fuel duty cut.

"We are committed to keeping taxes for working people as low as possible - which is why at last Autumn’s Budget we protected working people's payslips and kept our promise to not raise the basic, higher or additional rates of Income Tax, employee National Insurance or VAT."