Under measures announced yesterday by the prime minister Boris Johnson, a new social care levy will see the introduction of a 1.25% hike in National Insurance rates for employees and employers, effective from April 2022, set to raise £12bn a year, of which £600m will be generated by an increase in the dividend tax rate.

Paul Dickson, CEO and managing partner at Armstrong Watson, said: ‘This increase in national insurance will have a big impact on business. It is effectively a tax on businesses for employing people. It will create a significant additional burden at a time when they will be dealing with the aftermath of the pandemic.

‘Not only are businesses trying to navigate out of the economic fallout of the pandemic, they are also facing greater costs, and now they are being hit with a tax because they employ people. There is no correlation to profits. If a business was making more profit, then I think increasing tax by 1.5% would be more bearable, but it isn’t, this announcement taxes businesses based on their salary bill.

‘