Rachel Reeves admits the rise in national insurance contributions will be challenging for businesses, charities, and local councils to absorb

Chancellor Rachel Reeves has conceded that the upcoming increase in national insurance contributions will not be “easy” for businesses to absorb. From April 2025, employers will face a rise in contributions to 15%, a change that is also expected to affect charities and local authorities.

Speaking at the Yorkshire Post’s Great Northern Conference in Hull, Reeves acknowledged the burden on businesses but reiterated Labour’s commitment made during the general election to avoid increasing taxes on working people. This commitment, however, has been questioned by the Conservatives, who argue that Labour’s pledge did not specify the distinction between employee and employer contributions.

Reeves defended the decision, citing the need to balance the tax system by increasing contributions from the wealthiest, alongside the national insurance hike. She stressed that businesses, especially small ones, would face challenges but maintained that the decision was in line with Labour’s broader tax policies.

The impact of the national insurance increase has raised alarms, particularly in sectors like hospitality. Celebrity chef Tom Kerridge warned that the hike could lead to widespread restaurant closures, with some high-profile venues already deciding to shut down. Kerridge, who supported Labour during the general election, claimed the additional £800-£850 per employee per year would put immense strain on businesses, especially those already struggling post-pandemic.