Today’s UK Budget may have an adverse impact on Highland businesses.
Chancellor, Rachel Reeves announced that the UK Government would be increasing employers’ National Insurance (NI) by 1.2 per cent and reducing the threshold at which employers pay it to £5,000 from £9,100. The chancellor said she would extend the amount employers can claim back from their National Insurance bill from £5,000 to £10,500.
Tony Mackay, Inverness-based economist added: “The Chancellor stated that her Budget will increase the UK Government’s annual tax revenues by £40 billion a year. It is intended that that money will be used to improve public services such as the National Health Service (NHS), schools and transport.
”The main tax increase is in employers’ national insurance (NI) contributions, which are forecast to account for £25 billion of the total £40 billion. That will undoubtedly have adverse impacts on the many small businesses in the Highlands and Islands.”
Karen Kennedy of Kennedy Accountancy in Lochalsh said that there were no surprises around minium wage increases.
She said: “Alongside the Workplace Reforms coming in in April 2025, it means profit margins are going to be continued to be squeezed, particularly for hospitality industry.
“Removing the reduced wage levels for 18 to 20 year olds means more mature people will demand a higher wage.
“Those businesses who have already squeezed profit margins will need to increase prices to combat this which is tough in a cost of living crisis, and will also potentially push them over the VAT threshold.
“Employers’ National Insurance going up and the threshold at which it is paid going down on the face of it looks like a rise, but given the employment allowance is doubling then actually a lot of businesses (including mine) will pay less employer NI.”
Scotland’s hospitality body, The Scottish Hospitality Group, has said today’s announcement has come as a blow to the industry, with costs set to rise a minimum of £3million for Scotland’s top operators
Stephen Montgomery spokesperson for the Scottish Hospitality Group commented: “Today’s announcements are a blow to businesses across the country, but it is particularly concerning for the hospitality industry.
“It is estimated that it the Chancellors plans will add 10 per cent to operating costs and it could certainly cost jobs.
“The rise in National Insurance Contributions for employers at 1.2 per cent, and the reduction from £9100 to £5000, will see most of our members paying an additional £160,000 a year and that’s before the 6.7 per cent and 16 per cent increase in the National Minimum Wage is included or the added costs implementing the Employment Rights Bill.
“With £3.4billion in additional Barnett consequentials, the Scottish Government now has the funds available to make good on its commitment to support the hospitality sector and deliver an immediate reduction of the business rates poundage to 35p in the coming Holyrood budget.
“This is particularly the case given the Chancellor of the Exchequer has extended business rates relief for the hospitality sector in England and has also indicated the UK Government will reform the entire business rates system from 2026.
“Reducing the business rates poundage to 35p in the Holyrood budget would help the hospi- tality sector to boost economic growth, create jobs and support Scotland’s communities and high streets, while also ending the inherent unfairness that sees hospitality businesses taxed at a higher rate than retail businesses.”
Colin Marr, chief executive of Inverness Chamber of Commerce added: “We were expecting an increase in employers’ national insurance contributions and that came in a 1.2% increase but we also had a lowering of the threshold its paid at – so combined that’s a far bigger increase than we were expecting.
“To offset this the employers’ allowance has been increased so for some small businesses the overall amount that they pay NI will be less or the same – businesses will need to take tie to work out the affect it will have on them – but for anyone employing around 8 or more people their costs will probably increase.
“The rates relief that hospitality and leisure businesses in England and Wales have received for the last two years has been extended. The Scottish Government received the funding for this but chose to spend it elsewhere.
“We call on the Scottish Government to recognise that our hospitality and leisure sector will be struggling after today with the increase in national living wage and the increase in employers NI and ask them to pass on this rates relief so they have parity with their colleagues south or the border.
“We were pleased to see that fuel duty wasn’t increased as it would have hit our rural car dependent economy harder than other parts of the country.
“There has also been an increase of £3.4 bn to Scottish Government and we look forward to seeing where the Scottish Government chooses to spend that money and would encourage them to prioritise infrastructure projects in the Highlands.”