“Jobs tax:” workers living in these areas will be £££s worse off due to ENI hikes finds Lib Dem research
Freelancers across the UK, particularly in concentrated and high-value areas such as Kensington and Chelsea, the City of London, and Westminster, are facing a bigger financial blow than most as the recent hike in employers’ National Insurance contributions begins to take effect.
Research conducted by the Liberal Democrats reveals that workers in the worst-hit regions could see their real wages reduced by an average of nearly £11,000 by the end of the decade, a consequence of businesses and local councils reportedly passing on the increased costs.
Jobs tax being passed down to workers and consumers
The rise in what the Liberal Democrats are branding a “jobs tax” came into force recently, and analysis of the Office for Budget Responsibility (OBR) data suggests a substantial portion – around 76% – will be passed down to PAYE employees in the form of lower real wages. This means that over the next five years, UK workers, especially contractors and umbrella workers on PAYE could collectively lose out on approximately £89 billion.
For freelancers, who often operate on tight margins and bear the full brunt of economic shifts, this news is particularly concerning. Unlike traditional employees, they may find it harder to negotiate higher rates to offset the reduced real income, especially if companies and local authorities, key clients for many freelancers, are actively seeking to mitigate their own increased National Insurance burdens.
The Liberal Democrats want to spotlight regional disparities. While every local area is projected to see employees worse off by at least £2,100 by the end of the decade, those in Kensington and Chelsea are expected to bear the heaviest burden, with an average loss of £10,800. The City of London (£10,469) and Westminster (£8,353) follow closely behind. These areas are home to a significant number of freelancers working in sectors like finance, media, and professional services, raising fears of a talent drain or increased financial hardship.
Growth-crushing policies
Daisy Cooper MP, the Liberal Democrat Treasury spokesperson, has voiced strong concerns, stating that the Chancellor “risks an epidemic of boarded up shop fronts” as household finances face “another battering” amidst the ongoing cost of living crisis. She argued that the “jobs tax” is a “growth-crushing” measure that will hinder economic recovery and negatively impact both workers and high streets.
“These figures lay bare the grim reality of the Chancellor’s jobs tax,” Ms. Cooper said. “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.”
Call to scrap NI hike
The Liberal Democrats are calling on the Chancellor to immediately scrap the National Insurance increase and to overhaul the business rates system, which they believe is further stifling growth on high streets. They argue that these measures are essential to protect family finances and unlock the economic potential of town centres.
As businesses and local authorities do anything they can to save on increased costs, the pressure on freelancers to absorb these burdens through lower rates or reduced work opportunities is likely to intensify, particularly in the areas predicted to be hardest hit by the so called “jobs tax.”
The debate over the fairness and economic consequences of this policy is set to continue, with many freelancers bracing for a challenging year ahead.
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