The first budget in the UK to be presented by a woman chancellor was intended to close a black hole in public spending, improve public services, compensate victims of scandals and maintain defense spending. Labour has remained true to its manifesto promises and refused to add extra taxes on ‘working people.’ As our panel of experts has said, however, businesses will face considerable additional costs.
Small businesses will benefit from the Employment Allowance
Mathew Akrigg is a policy and research officer at the Chartered Institute of Payroll Professionals
“Such positive changes in national minimum wage and parental rights as well as statutory sick pay are great news for workers, but they cost employers a lot. The employer’s national insurance contribution will increase by 1.2 percentages points, and the threshold for the employer’s pay to be eligible for NI will drop from PS9100 to PS5,000. This will result in an overall increase of the cost of employment across the UK. This could lead to a reduction in employment and a suppression of wage growth.
It is good news for small business that the Employment Allowance has increased from PS5,000 up to PS10500. The majority of UK employers are small businesses, so it’s important that the government supports them.
The current freeze on [tax] thresholds will not be extended beyond 2028. The workers will be able to keep more of their earnings as the thresholds rise in line with inflation between 2028 and 29. For the years that these thresholds have been frozen, they have acted as a sneaky tax on workers who are earning more.
The Industrial Strategy must deliver
Neil Carberry is the chief executive of the Recruitment and Employment Confederation
“Reassuring business must now focus on ensuring that the extra contribution they make will be returned to them as better fundamentals for our economy. This includes easier ways to do business, shorter wait lists, better planning, new infrastructure, and better access low-cost capital. It is important that the Industrial Strategy delivers. The government must step in if business is asked to do their part.
Neil Carberry: “The chancellor has the right idea to address issues surrounding umbrella company compliance, but he’s chosen the wrong tool.”
We were delighted to hear the chancellor mention the labour market in his remarks. It is good to see additional funding for the labour market and to address inactivity. But government programmes work better when they are implemented with private sector partners.
“The government should have included reforming NHS personnel management in its determination to make tough decisions. We need to fix the current dysfunction in how we procure temporary staff, which is vital for service delivery. The current system is inherently flawed because it encourages last-minute, short-term solutions.
The chancellor has the right idea to address issues of umbrella company compliance, but he’s chosen the wrong tool. The employment businesses are some of the most heavily regulated in the country. Taking on the responsibility of supply chain compliance is going to be a strain. The umbrella companies are not regulated. It is long past due and would create a level playing field.”
“An abundance of opportunities”
Steve Collinson, Chief HR Officer at Zurich UK
Flexibility is the key to the Growth and Skills Levy. This fund could provide an abundance of opportunities for talent-development that are simply untapped by the rigid structure.
“We are aware that only 44% of the levy is used by companies in this country, which we feel is a lost opportunity. It is an important part of the business model, as we use 87% each year. This is not only for those who are just starting out in their career. Many people in our company are enrolling in the scheme to develop and grow their careers. We’ve seen a 130% increase in the number of existing employees who have signed up for courses through the scheme.
We also donated a quarter-million pounds of training to charity partners, which has a real impact on talent development. We’d like to see this more often. There are many ways to support businesses that don’t qualify for levy.
“Employment can be suppressed”
Ben Harrison is the director of Work Foundation at Lancaster University
The chancellor tried to balance a tight fiscal and political rope by committing to an additional PS40 billion of taxes, while prioritising an increase of 1.5% in investments in public services as well as more funding for capital and infrastructure projects.
To fund these increases the chancellor has confirmed that the threshold below which businesses begin to pay national security contributions will be reduced, which is expected to raise an additional PS25bn. According to the OBR, this could reduce employment rates by 50,000 (0.2%) in 2029-30 as employers find it more costly to hire people. It may be harder for the government to achieve its goal of achieving 80% employment.
Ben Harrison: “It is encouraging to hear that the chancellor has committed to an integrated approach between government departments in order to combat economic inactivity”.
While the chancellor honored Labour’s commitment to not raise taxes on workers, the continuation of the tax threshold freeze for the time being will push hundreds of thousands into higher tax brackets during this majority of the Parliament. This announcement that the tax freeze will end by 2028-29 will be welcomed, but it will also present a challenge for those who earn less and will have to pay more in taxes.
It is encouraging to hear that the chancellor has committed to an integrated approach between government departments in order to combat economic inactivity. The funding of 16 trailblazer local projects may help to spark innovation and get more people back into the workforce. To be effective, more than the PS240 million announced will likely be required in the future.
The government’s Get Britain Working White Paper will reveal the details in November.
Preventing illness is the best way to prevent it
David Williams, Towergate Employee Benefits’ head of group risks
“Although headlines will follow the government’s plans for NI and other financing mechanisms for public expenditure, there was a quiet yet welcome insight into the goals of their efforts to reduce sickness absence among the working-age population.
“First, we’ll see a white paper called Get Britain Working which will explore the root causes of inactivity (amongst other things) and poor health.
“Secondly, the NHS funding was showing signs of life when the chancellor stated that the goal is to move from sickness to prevention. This phrase is a welcome one for the employee benefits industry, which focuses on prevention and rehabilitation of workplace illness.
“However the details are still vague and any investment to improve NHS capacity will take time. It’s important that employers, while waiting for the private sector to step in, take advantage of their employee benefits. “The frustrating thing is that increasing employer National Insurance Contributions will negatively impact budgets of companies at the exact same time we are trying to encourage employers to spend more money on their employees’ wellbeing.”
The promise of growth
Ash Gawthorp is the chief academy officer of Ten10
Labour’s Industrial Strategy shows promise, particularly with budgets allocated for key sectors like aerospace, automotive and life sciences. However, the talent gap is a major obstacle to achieving these goals. The government’s commitment towards tech was questioned by earlier cuts to AI funding. Businesses were now looking for renewed support to the UK’s technology ecosystem.
The government’s decision to invest over PS20 billion, including PS6.1 for research in biotechnology, engineering and medical sciences is a step in the right direction towards closing these gaps and restoring trust in the sector.
The establishment of Skills England was a positive development. This is an encouraging start to fostering a more skilled and inclusive workforce, particularly as we strive to harness high demand fields such as AI, green hydrogen and gigafactory.
You can have a positive feeling as a freelancer
Seb Maley, Qdos CEO
Employers, especially small businesses, may be resentful of the increase in employers’ national insurance. Freelancers and contractors may be more optimistic about the tax change. Costs of employment will rise, leading to an increase in the demand for contractors and freelancers who work off-payroll. A rise in employers’ NI may be what businesses need to rethink their stance, given how many companies have moved contract workers onto the payroll as a result of IR35 reform. This could be a catalyst to contract opportunities.
This brings IR35, and off-payroll regulations into sharp focus. Businesses that engage contractors and other self-employed workers must ensure compliance with employment laws and make sure these workers are employed under the right status. These rules are complex and can lead to huge tax liabilities that could negate any savings on employers’ national insurance.
The move to crack down on noncompliant umbrella firms that lure in unwitting workers only to leave them with crippling tax bills has been a hot topic for some time. The goal is to protect 700,000 people who work through these intermediaries by making businesses and recruiters responsible for the correct PAYE deductions from 2026. The government asks the supply chain in some ways to monitor the compliance of umbrella firms and take the rap if there has been tax avoidance.
“Thin gruel” for further education
Jo Grady is the general secretary of University and College Union.
“Today’s Budget will be a sour pill for university workers.” The sector will be hit hard by the rise in employer national insurance when it is already struggling. The Chancellor has failed to provide the increased funding that universities need to ensure their future as Britain’s last world-leading industry.
“We welcome increases in the national minimum wage and apprentice wages. This will improve the lives of all workers, and grow the economy. The PS300m additional funding for higher education must be used in order to match the 5,5% pay increase that schoolteachers have received, and close the PS9k wage gap. “If pay does not rise, colleges continue to lose staff and will have no one left to teach the workforce of tomorrow.”
The business relief was a great relief
Nicholas Hyett is the investment manager of Wealth Club
Business relief is vital to the future of small family businesses across the country. The budget reforms are not as draconian as feared. Full relief is capped at 1 million PS, which is still a generous amount. After that inheritance tax will drop to 20%.
“The decision to not add a hard limit to business relief prevents the worst case scenario for those who invested in specialist products, such as solar farms, property developments lending and care homes. The assets are illiquid, and a complete withdrawal of tax relief could have left investors with a long-term lock in and/or a painful value markdown.
This reform is a cause for concern to larger companies across the country.
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