The clearest signal yet that businesses may face a National Insurance hike has come from the Chancellor, coinciding with the government’s announcement that billions of pounds in overseas investment have been secured for UK projects.
Rachel Reeves, the Chancellor, clarified Labour's election pledge not to increase National Insurance on "working people", stating that this referred to the employee contribution rather than the amount paid by employers. Her comments come as businesses await the government's full economic plans, set to be revealed in the upcoming Budget on 30 October.
The government claimed success from its recent international investment summit, stating that £63bn of private funding had been secured for UK projects. However, some of these commitments had already been disclosed before the event. Despite the boost in overseas investment, many business leaders remain cautious, awaiting details of potential tax increases that could impact their bottom lines.
Reeves reiterated that the forthcoming Budget would be "tough", but emphasised that difficult decisions wouldn’t deter investment. She promised that businesses would receive long-term certainty regarding taxation, which she believes will help maintain the UK's appeal to investors.
While the government has ruled out increasing VAT, National Insurance for employees, or income tax, speculation has intensified around the possibility of raising the employer’s contribution to National Insurance. This would mark a significant shift in policy, though Reeves stood firm on her pledge not to increase taxes on "working people", a sentiment echoed by Business Secretary Jonathan Reynolds. The only guarantee given to businesses so far is a cap on corporation tax at 25% for the next five years.
There is also speculation about a potential rise in Capital Gains Tax, which is levied on profits from the sale of valuable assets, such as second homes. However, Prime Minister Sir Keir Starmer downplayed reports that this could reach as high as 39%, calling such figures "wide of the mark" but offering no further details.
Additionally, Reeves hinted at potential changes to borrowing rules to unlock further public spending for major infrastructure projects. "We do want to free up investment in those long-term responsible investments that we need to make, to unlock the private investment into our economy," she said.
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