Following the National Insurance Contribution changes announced in the Budget, Todd Davison, MD of Purbeck Personal Guarantee Insurance says: “The increase in National Insurance contributions is going to act as a fatal blow to thousands of small businesses, despite the increase in the Employment Allowance. It’s a sucker punch after a gruelling few years for many traders in labour intensive sectors such as hospitality, leisure and retail. These businesses are still recovering from the impacts of COVID-19 and dealing with a high inflation economy where consumers have pulled back from spending.
“We know the extreme financial pressure these businesses are already under. Our data shows the main reason for personal guarantee backed business loans taken by the owners and directors of the UK’s small firms are for working capital to just keep the business going.
“The Employer NICs have already been increasing in these sectors due to the introduction of the National Living Wage rate which has put more individuals above the £175 a week threshold where the tax is charged to the employer. This, against a backdrop of business rate relief ending, inflation and supply chain costs.
“NICs are already the UKs second biggest tax, behind income tax with the bulk of this making up an estimated 63% of revenue in 2023 to 2024.
“Ultimately, this increase will make it more expensive to run a business and will impact the people employed by limiting hiring plans, reducing wage inflation, forcing redundancies and scaling back pension contributions. It will also trickle down to customers through increased costs and poorer service if the business is having to operate with fewer staff.
“There will be thousands of business people who have put their home and life savings on the line by signing a personal guarantee for a business loan who will now face some very difficult choices. Do they soldier on and bear the cost or quit and risk losing more than their business? Purbeck Insurance Services will be there for those directors who have taken personal guarantee insurance to support them through, as we did during the pandemic.”
