Recruitment industry criticises NI increases for social care reforms

The announcement yesterday [7 September] of National Insurance (NI) and dividend tax increases to cover NHS and social care reforms has been roundly criticised by representatives of the recruitment sector and umbrella workers.

From April 2022, NI will increase by 1.25%. At the same time, the dividend rate will be increased to 8.75% and 33.75% on both the employed and self-employed, whose income falls above the Primary Threshold/Lower Profits Limit of £9,569.

“We all agree that social care needs more funding, but increasing labour taxes as we try to recover from the pandemic is not the fairest way to do it,” said Neil Carberry, CEO of the Recruitment & Employment Confederation (REC). For instance, he said, the 1.25% rise in NI “is the wrong choice”. The accompanying rise in taxes on dividends “will hit small limited company directors, who were denied any support during the pandemic”, he added. 

Tania Bowers, legal counsel and head of public policy at APSCo, pointed out that both worker and employer will have to pay the 1.25% rise, for a total of 2.5%. “This will only serve to drive umbrella and PAYE agency worker costs up, which will exacerbate the ongoing shortage of workers that UK employers are currently struggling through.” 

Worse, “in the case of umbrella company workers, most will end up paying both the employers and employees NICs rises so they will be taxed twice”, said Rebecca Seeley Harris, former adviser to the Office of Tax Simplification and chair of the Employment Status Forum.

“This is obviously another blow to workers who are already in a precarious position. This will include care workers and NHS, working in the sector that the levy is supposed to fund, going through umbrellas. More and more are expected to be self-employed or must agree to be employed through agency umbrellas, many of which are unethical. It’s an untenable situation for them,” Seeley said.

James Poyser, CEO of inniAccounts and founder of, added that self-employed professionals would see these latest moves as “yet another cynical indictment by the Conservative government on so-called personal service companies”.

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