Workers will be hardest hit by the next increase in employer National Insurance (NI) contributions, the government's finance watchdog has said.
During the Budget, Chancellor Rachel Reeves said employers would pay NI at a rate of 15% on salaries above £5,000 from April, compared to 13.8% on salaries above £9,100.
The Office for Budget Responsibility (OBR) calculated that three-quarters of the impact would be felt by employees, with bosses curbing pay increases and hiring in the face of higher payrolls.
Professor David Miles of the OBR said it was “highly plausible” that it would disproportionately affect lower-paid workers.
Professor Miles told the Treasury Select Committee on Tuesday that the OBR estimated employers would only suffer about a quarter of the shock from the NI changes in terms of falling profits.
He suggested the remainder would be felt by workers.
Asked if he agreed with those who say low-paid workers would be disproportionately affected, Professor Miles said “on the face of it, it's very plausible”.
He says this is partly due to the reduction in the threshold at which employers pay the tax.
He suggested, however, that the personal impact on workers could be “somewhat offset” by the increase in the minimum wage announced in the Budget.
The OBR's comments come after much debate around the Labor manifesto's claim that there would be no tax rises on “working people” after its first budget in 14 years.
James Smith, research director at the Resolution Foundation think tank, said the changes to NI were “undoubtedly a tax on workers”.
“Even if it doesn’t show up on pay slips from day one, it will eventually translate into lower wages,” he said.
Chancellor Rachel Reeves defended the employer tax increase in last week's Budget, while saying she was “not immune” to the criticism it received.
She told the BBC the money raised would help put public finances back on “solid footing”.
The decision has been criticized by many businesses, including GPs, who say it could harm services for patients.
