Prominent figures from the UK retail and hospitality sectors, including executives from Tesco, Sainsbury’s, Marks & Spencer, and the Co-op, recently met with Chancellor John Healey. During the session at No 11 Downing Street, industry leaders discussed the mounting financial pressures facing high street businesses, specifically regarding the recent increase in employers’ National Insurance contributions. The chancellor heard from sector leaders – including the boss of Marks & Spencer, Stuart Machin, and Sainsbury’s chief executive, Simon Roberts – about the impact of the rise in employers’ national insurance contributions (Nics), at the No 11 event on Tuesday morning.
Retailers are seeking a partial reversal of a policy implemented by former Chancellor Rachel Reeves, which dropped the earnings threshold for employer National Insurance contributions from £9,100 to £5,000 annually. Industry representatives argue this shift has contributed to a notable decline in job opportunities for young and part-time workers, driving up youth unemployment.
To remedy these trends, businesses have proposed raising the National Insurance threshold to £6,000. They contend that this adjustment would not only help foster job creation but also relieve inflationary pressures currently impacting the retail landscape. One source present at the discussion noted a sense of optimism regarding the dialogue, stating, “It felt like they were listening.” They want the Nics threshold raised to £6,000, arguing this would help create jobs and ease inflation pressures on high streets.
Helen Dickinson, chief executive of the British Retail Consortium, highlighted the sector’s vital role in supporting national growth and providing early career paths for young people. She warned that after facing a 20% increase in tax burdens over two years, including £6.5bn in new employment costs, businesses may be forced to pass these expenses to consumers at the till unless fiscal relief is provided.
Chancellor Healey has expressed a commitment to reducing the costs of doing business amid rising energy expenses. While representatives remain hopeful for support regarding business rates and employment tax adjustments, the Treasury has maintained its standard position. A spokesperson stated that tax decisions are reserved for formal fiscal events and declined to comment on speculation or specific proposals.
Beyond high street concerns, the Treasury is weighing broader tax strategies. Reports suggest Chancellor Healey has rejected calls from various Labour MPs and economists to align Capital Gains Tax (CGT) rates with income tax levels. Proponents of this change, such as Defence Secretary Wes Streeting, previously dubbed the strategy a “wealth tax that works,” while First Secretary Louise Haigh has also advocated for CGT rates to be brought closer to income tax levels.
Currently, CGT is levied at significantly lower rates than income tax. Following 2024 budget adjustments by Reeves, CGT stands at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers, trailing the standard income tax rates of 20%, 40%, and 45%. Estimates suggest that equalizing these rates could generate roughly £11.3bn annually for the public purse. In her first budget in 2024, Reeves increased the rate of CGT from 10% to 18% for basic-rate taxpayers, and from 20% to 24% for higher-rate taxpayers. Economists have suggested an equalisation of the rates could raise £11.3bn a year for the exchequer.
Despite this potential revenue, financial reports indicate the Chancellor fears that aggressive CGT hikes could hinder inward investment. Consequently, while a full equalization is unlikely, the government may still consider more modest increases to the tax on assets as it seeks to balance funding for public services, household support, and infrastructure projects. Making tax fairer and unlocking investment.”, his first budget is the chance to turn that ambition into action by easing costs.
