Will Reeves go into reverse this spring?

  • Person icon Tim Evershed
  • Calendar icon 15 January 2025 08:48

While Chancellor Rachel Reeves has now set a date for the Spring Statement, the backlash from her Autumn Budget is yet to subside. Farmers continue to protest about the reduction in Agricultural Property Relief (APR), while many businesses have expressed concerns about the increase in employers’ National Insurance contributions (NICs). Will Ms Reeves be forced to amend the plans announced in October or will she stay the course? Here we take a look at the reaction to the rise in employers’ NICs.

 

The Spring Forecast

Ms Reeves has set the Spring Statement for 26 March 2025.

The Chancellor said: 'I intend to respond to the March forecast with a parliamentary statement.

'This is in line with my commitment to deliver one major fiscal event a year, to give families and businesses the stability and certainty they need and, in turn, to support the government's growth mission.'

A multi-year Spending Review is also due in 2025, and the Chancellor has indicated that this will require the government to make savings amounting to 5% of spending.

 

Stalled economy

At the Autumn Budget, Ms Reeves announced that the employers’ NICs rate will increase from 13.8% to 15% from 6 April 2025.

The Secondary Threshold, currently set at £9,100 a year, is the point at which employers become liable to pay NICs on an individual employee’s earnings. The government will reduce the Secondary Threshold to £5,000 a year from 6 April 2025 until 6 April 2028, and then increase it by Consumer Price Index (CPI) thereafter.

However, revised growth figures from the Office for National Statistics (ONS) for Q3 2025 showed that the economy stalled since Labour’s election, with zero economic growth in the quarter.

This has led to one business group asking for a rethink on NICs.

Kate Nicholls, Chief Executive of UK Hospitality, said: ‘These revised growth figures confirm what we already suspected – that the economy is in a fragile place and in dire need of growth.

‘But with business confidence already plummeting and a third of hospitality businesses operating at or below break even, the planned changes to employer NICs will make generating economic growth even more difficult.’

 

Collapse in confidence

The hospitality industry is not alone in expressing its unease with the Autumn Budget tax hikes.

In a recent survey conducted by the British Chambers of Commerce (BCC), nearly two thirds of businesses said they were concerned about the rises in tax and employer NICs.

This is the highest level of tax concern since 2017, when the BCC first started asking this question.

Shevaun Haviland, Director General of the BCC, said: ‘The worrying reverberations of the Budget are clear to see in our survey data. Businesses confidence has slumped in a pressure cooker of rising costs and taxes.

‘Firms of all shapes and sizes are telling us the national insurance hike is particularly damaging. Businesses are already cutting back on investment and say they will have to put up prices in the coming months.

‘The government is rightly coming up with long-term strategies on industry, infrastructure and trade. But those plans won’t help businesses struggling now.’

 

This Spring

Will Ms Reeves be swayed by the concerns of businesses over the costs they face and the wider slowdown of the economy?

Whatever happens in the Spring Statement, Mercia’s tax experts will be watching and will provide detailed analysis of the government’s fiscal announcements. Keep your clients up to date with our range of digital products.

 

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