TaxPersonal TaxNICs increase will cripple SMEs

NICs increase will cripple SMEs

An increase in national insurance contributions could cripple small and medium sized businesses by hitting employers directly with extra costs, warned mid-tier firm PKF.

The firm, which specialises in serving SMEs, said a typical business with 100 employees would have to pay an additional £23,607 each year if the chancellor increases national insurance by 1% in the Budget and £47,214 extra per annum if he increased it by 2%.

PKF tax partner Sheena Sullivan said: ‘National insurance is a tax on jobs and adisincentive to employ which would hit SMEs, the bread and butter of the UK economy – the hardest.’

To soften the blow, Sullivan recommended employers issue shares to employees, as they are not readily convertible into cash, adding that this was the best way of using the Revenue approved share schemes to save income tax.

Other advice from PKF includes paying employees dividends, increasing employer pension contributions or using other benefits in kind, such as child care vouchers, which are not subject to national insurance.

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