“Who would want to own a business under this Labour government? Labour has killed aspiration and crushed entrepreneurship, leaving hardworking Brits questioning if it’s even worth trying to succeed anymore.”
Shops, restaurants, and small businesses across the UK are bracing for record tax bills this year as Rachel Reeves’s Budget puts unprecedented pressure on employers.
The cost of employing a full-time worker on minimum wage is set to soar by £2,367 in 2025, with the total hitting more than £24,800 per employee—a whopping £5,000 of that going straight to the Treasury, according to new analysis by the Centre for Policy Studies (CPS).
This sharp increase from Labour is driven by two major changes:
- Employer National Insurance contributions will rise significantly in April.
- An inflation-busting hike in the National Living Wage will push wage costs higher.
For the first time since its introduction in 1999, a record 21.3% of the money spent by businesses on employing minimum wage staff will go to the government in taxes, up from 17.5% last year. In stark contrast, in 2015—when the personal tax-free allowance was increased—the tax wedge stood at just 11%.
Robert Colvile, director of the CPS, described Ms Reeves’s move as a “tax on jobs” that would stifle economic growth. He warned:
“Labour claims to understand the importance of growth and to have made it a priority. But it was clear from the moment of the Budget that taxing jobs and work would damage the economy.”
Economist James Wright added: “Sadly we will start to see many more businesses shut up shop and those that do survive… they won’t be hiring.
“I have a hard time believing Rachel Reeves understands simple economics. Taxing jobs and work will damage the economy and hit the very businesses she is relying on to drive recovery.”
Biggest Tax Hike in History
The CPS has labelled this the largest single tax increase on businesses in British history and the impact on small businesses is already visible with many pausing recruitment, cutting hours, or considering layoffs to cope with the increased costs.
A spokesperson at the CPS, said:
“Increasing taxes on employment harms businesses and workers alike. By making it more expensive to hire, these hikes hit the lowest-paid workers hardest and discourage businesses from bringing people back into the workforce.”
A former Conservative MP said: “Who would want to own a business under this Labour government? Labour has killed aspiration and crushed entrepreneurship, leaving hardworking Brits questioning if it’s even worth trying to succeed anymore.”
What’s Next for Businesses?
With 71% of business leaders already pessimistic about the UK’s economic outlook, many are calling for urgent government action to ease the burden. The CPS and industry leaders alike have warned that, unless changes are made, Labour’s policies could push struggling sectors to breaking point.
For now, the message from businesses is clear: without relief, these record-breaking tax hikes threaten not just profits, but jobs and livelihoods across the country.
