UK Government Is Considering Raising the Payroll Tax on Businesses, Creating a Discussion About a Labour Manifesto Promise.

Speculation is mounting that the UK Labour government may raise payroll taxes for businesses by increasing their national insurance contributions (NICs). In an interview with Sky News, Business and Trade Secretary Jonathan Reynolds clarified that the Labour manifesto only committed to not increasing NICs for employees, not for employers. However, a source close to Labour’s budget plans indicated that a hike in employers’ NICs is under consideration by Chancellor Rachel Reeves, a move that could help address a £22 billion budget deficit.
Prime Minister Keir Starmer recently suggested that increasing payroll taxes for businesses might be on the table during the upcoming budget. He maintained that Labour’s manifesto specifically referenced no tax rises for working people. One proposed option is to levy NICs on employers’ pension contributions, potentially generating £16 billion annually.
The Conservative Party, however, has strongly opposed any such move, labeling it a breach of Labour’s campaign promises. Shadow Work and Pensions Secretary Mel Stride dismissed the idea, calling it an “absurdity” to argue that increasing business taxes would not violate Labour’s manifesto commitment. The debate highlights the balancing act Labour faces in addressing public finance challenges while staying true to its pre-election promises.