National Insurance rise to hit City of London small businesses the hardest in UK
Small businesses in the City of London will be the worst hit in the UK by the coming rise in National Insurance, according to new research shared with City A.M.
Figures from the House of Commons library, and collated by the Liberal Democrats, show small businesses in the Cities of London and Westminster constituency will collectively pay an extra £84.7m in tax each year, after the 1.25 percentage point increase in National Insurance comes in from April.
Read more: ‘Tax-cutting Conservatives’ Boris Johnson and Rishi Sunak confirm tax rise is going ahead
Small businesses in the constituency of Holborn and St Pancras will be hit the second hardest in the country and will pay £23.8m extra a year in tax – just a quarter of the amount lost in the Cities of London and Westminster.
Islington South and Finsbury is in third place with small businesses paying £14.2m more a year due to the coming tax rise.
It comes as Boris Johnson and Rishi Sunak today confirmed the tax rise would go ahead, after speculation that it could be shelved under pressure from Tory MPs.
Retail and hospitality businesses in central London have been battered over the past two years thanks to Covid lockdowns and restrictions.
A report from the Centre for Cities think tank last week found businesses on central London’s high streets have lost the equivalent of 47 weeks of sales throughout the pandemic.
Liberal Democrat leader Ed Davey said: “The Conservatives’ broken promise is a betrayal that will create a tax bombshell for the small businesses that are the backbone of our communities.
“It is not just the City’s entrepreneurs and tech start-ups which will get slammed by this, but also our treasured cafes and restaurants who have barely survived through lockdowns.”
Some Conservative MPs have demanded that Johnson scraps the 1.25 percentage point increase in National Insurance in return for their support in any potential no-confidence vote on his leadership of the Tory party.
The Prime Minister also refused to give a straight answer last week when asked if the tax hike would go ahead in April as planned.
Johnson and Sunak today made a firm commitment to go ahead with the increase, which is designed to tackle the Covid-induced NHS backlog and reform social care.
Writing in The Sunday Times, the pair insisted that it is right to follow through on the “progressive” tax hike.
“We must clear the Covid backlogs, with our plan for health and social care – and now is the time to stick to that plan. We must go ahead with the health and care levy. It is the right plan,” they said.
“Every single penny of that £39bn will go on these crucial objectives – including nine million more checks, scans and operations, and 50,000 more nurses, as well as boosting social care.”
A government spokesperson said: “We’ve supported businesses throughout the pandemic through our nearly £400bn package of support, and will continue to do so.
Read more: Swelling tax burden to highest level since 1950s is ‘understandable’
“The Health and Social Care Levy will provide a necessary, permanent source of funding needed to support the NHS and fix the social care system. It’s right that employers, who benefit from a healthy workforce, contribute to the levy so the costs are more widely shared.”