Businesses in the North face rising costs following Wednesday’s UK budget, experts and lobby groups warned as Britain’s chancellor of the exchequer Rachel Reeves ended her speech.
The minister pledged to boost the minimum wage to £12.21 an hour from £11.44 and hike employer’s national insurance to 15 per cent from 13.8 per cent to aid the Labour government’s bid to raise living standards and plug a £22 billion hole in public finances.
Both moves will increase employers’ wage bills in Northern Ireland, according to Lorraine Nelson, partner and head of tax with accountants BDO in Belfast. She predicted that this would add to burdens faced by businesses locked in “a war for talent” with local rivals and those across the Border in the Republic.
Ms Nelson argued that employers could ultimately be forced to pass on the extra costs to customers, with a broader impact on the region’s economy.
“It’s not good,” she said of the national insurance increase. “I realise that a lot things have not moved, but this is something that has.”
Joel Neill, operations director of trade body, Hospitality Ulster, said Ms Reeves had “done nothing but increase the cost of doing business” for the group’s members. Branding the measures as unsustainable, he called for a VAT cut or the extension of business rates reliefs in England and Wales to Northern Ireland.
Northern Ireland will receive £18.2 billion in UK government funding for 2025-26 in what the treasury said was “the largest settlement since devolution began”. The higher than expected funding includes £1.5 billion in so-called Barnett funding – cash to compensate for extra spending in England on top of the region’s annual grant.
“The Northern Ireland Executive Settlement for 2025-26 delivers a real terms increase and is the largest in real terms of any settlement since devolution began,” Darren Jones, chief secretary to the treasury, told reporters on a video call.
Ms Nelson suggested the chancellor’s plan to scrap the long-standing domicile rules governing tax residency could have ramifications for people with assets or other interests on both sides of the Border.
The change will leave the Republic with a different tax residency regime rather than a similar one, which is the case now.
Similarly, a stamp duty surcharge to 5 per cent from 3 per cent on second or additional homes will hit someone from the South buying such a property in Northern Ireland.
Inheritance tax changes could hit farms and small businesses, she noted.
The first £1 million of agriculture and business properties will not be taxed, but rates of relief will fall after this point.
Ms Nelson said this could prompt people to sell the assets in order to pay the tax, leaving them potentially liable for capital gains tax (CGT), which the Labour administration is also increasing.
Airlines including Irish carriers, face increased air passenger duty as the chancellor added £1 to domestic flights, £2 to short-haul flights and £12 to long-haul journeys.
Ms Reeves increased an energy windfall tax to 38 per cent from 35 per cent, bringing the headline rate on oil and gas activities to 78 per cent. Analysts recently warned that such a move would hit natural gas production in the North Sea, from where Ireland imports large quantities of the fuel to generate around half the electricity used in the State.
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