TAX RAID
Martin Lewis issues warning for 700,000 workers as National Insurance hikes have ‘direct impact’ on take home pay
Rachel Reeves has provoked fury after admitting her Budget tax raid on business will hit workers in the pocket
MARTIN Lewis has issued a warning for 700,000 workers as National Insurance hikes have a "direct impact" on take home pay.
The MSE discussed how Rachel Reeves' Autumn 2024 Budget affects Brits in his Martin Lewis Money Show Budget Special tonight.
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Ms Reeves said she was raising the headline employer rate of National Insurance from 13.8 to 15 per cent.
To groans from Opposition MPs, the Chancellor also announced a reduction to the threshold business start paying NICs from £9,100 to £5,000.
It will raise £25billion - the equivalent of around £800 per employee for each firm.
For weeks Labour has insisted this would not break a flagship election pledge not to raise the rates of income tax, National Insurance and VAT on working people.
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Ms Reeves insisted to MPs: "Working people will not see higher taxes in their payslips as a result of the choices I make today.
"That is a promise made – and a promise fulfilled."
But, a self-employed audience member, who is working through an umbrella company, sent in a question.
They asked: "I pay both employer National Insurance and employee National Insurance. Out of what I earn, has the budget reduced my take home pay?"
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In response, the MSE said: "Almost certainly, yes."
An umbrella company acts as the middle man between an independent employer and their recruitment agency or direct client.
This mean you will be registered under the PAYE system, and they pay your income from the invoice after deducting items like tax, National Insurance contributions, and agreed fees.
Mr Lewis explained: "There are around 700,000 people who work through umbrella companies.
"They're often freelancers or supply teachers and they are counted as PAYE workers for an agency, but they're sort of self employed."
Alongside Martin on tonight's show was tax specialist Karri Mellon.
She agreed and said the new changes would affect this type of worker.
"Yes, that's correct, because where you have companies which have sole directors and employees, they will not qualify for the employment allowance," she said.
"So the company is going to be paying more employers' National Insurance, and that, therefore, means that the employee will have less to take home because they pay their own employer's National Insurance."
Martin added: "So being really honest, I said that there was an indirect impact for workers, but for the 700,000 umbrella company workers, there is a direct impact on the take home pay of working people."
Meanwhile, Paul Johnson, director of the IFS, also said yesterday that working people will still pay the price.
He said: "The OBR suggests that three quarters of the impact of employer NICs will be felt by employees, even if the changes don’t show up on payslips.
"Indeed, these tax rises partly explain why the OBR has downgraded its projections for real household income growth over the next few years.
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"Somebody will pay for the higher taxes – largely working people.
"The employer NICs rise will further increase the incentive for employers to switch to contracting with the self-employed."
Rachel Reeves provokes fury after admitting her Budget tax raid on business WILL hit workers’ pockets
By Ryan Sabey
RACHEL Reeves has provoked fury after admitting her Budget tax raid on business will hit workers in the pocket.
The Chancellor conceded that hard-working employees will be affected by their bosses paying more National Insurance to the tune of £25billion unless firms soak up the costs.
It came as the Tories said the average working household could face an annual £2,238 tax grab — up by around £200 on their previous estimate.
The row over tax hikes — totalling £40billion — erupted as it emerged Ms Reeves told voters three months before the election: “We don’t need higher taxes, what we need is growth.”
But she said yesterday: “I said that it will have consequences.
“It will mean that businesses will have to absorb some of this through profits and it’s likely to mean that wage increases might be slightly less than they otherwise would have been.”
Tory leadership contender Robert Jenrick claimed the Budget had been a “Halloween horror show”.
He added: “This was the biggest political heist in modern British history.”
He told Sky News: “£40billion of tax rises hurting people across this country and just three months ago the Labour Party won an election on a pledge not to raise taxes. I’m afraid Rachel Reeves is acting like a compulsive liar.”
The charity sector has expressed concerns over the impact of the National Insurance haul from employers.
National Council for Voluntary Organisations boss Sarah Elliott warned it will put “another strain” on them.
Meanwhile, Paul Johnson of the Institute for Fiscal Studies warned the raid will not raise “anything like” £25billion.
The Budget measures mean that by 2028 weekly wages will have risen by just £13 in real terms in two decades.
Mike Brewer of the Resolution Foundation said: “The short-term effect of these changes will be better-funded public services.
“But families are also set for a further squeeze on living standards as the rise in employer National Insurance dampens wage growth.”
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