WHERE AUSTRIAN ECONOMICS MEETS REAL WORLD ACTION

Think back to the last time you decided not to hire someone.

Not because the work wasn’t there. Because once you’d added up the salary, the pension, and the extra tax you pay simply for the privilege of employing another human being, the numbers stopped working.

That tax just got bigger — and the government has now frozen it in place until 2030. If you run a small business in Britain, the cost of growing your team has been locked in at a new, higher level for the rest of the decade. Here’s what that actually means, and what you can do about it.

Employer National Insurance is the tax you pay on top of every wage — money that never touches your employee’s pocket and goes straight to the Treasury. In April 2025 it climbed from 13.8% to 15%, and the threshold at which it kicks in was slashed from £9,100 of earnings down to £5,000. In plain terms, you now start paying the tax much sooner and at a higher rate.

The numbers bite hardest where margins are thinnest. For a worker on average earnings, an employer’s NI bill jumped roughly 25% — from about £3,715 to £4,655 a year. For someone on £20,000, it rose around 50%. Hospitality, retail and care — the sectors that employ the most people per pound of profit — took the heaviest hit.

In fairness, there’s a cushion: the Employment Allowance was raised from £5,000 to £10,500, so the very smallest firms can knock that much off their bill and some pay little or nothing. Keep reading, though — that cushion has a sting in it.

And here’s the part that turns a tax rise into a long-term problem: the rate and the thresholds are now frozen until 2030–31. This isn’t a one-off hit you ride out. As wages drift up with inflation, more of every pay packet falls into the taxable band each year — a quiet, automatic tax increase you never see announced. Meanwhile the Bank of England is giving no relief on the other side: it has held the Bank Rate at 3.75% since December, with one rate-setter at the last meeting wanting to push it higher, and the OECD has just cut its UK growth forecast to a feeble 0.7%. Expensive to hire, expensive to borrow, and barely any growth to grow into.

Let’s give the policy its due first. The rise was sold as a way to fund the NHS and public services without touching workers’ take-home pay — employee National Insurance was left alone, so no one sees a smaller payslip. The intention is one most people share: pay for healthcare, protect wages. Fair enough.

The problem is what the tax actually does. If you want more of something, you don’t make it more expensive — and this is a tax on the single thing every politician claims to want more of: jobs. You can’t tax the act of employing people and then act surprised when there’s less employing going on. The cost rarely shows up as a dramatic headline. It shows up as the raise that wasn’t given, the role left unfilled, the expansion pushed back another year.

There’s a deeper issue too. When you earn a pound and decide how to spend it, you’re telling the economy what you actually value. When the state takes that pound through a jobs tax and spends it on projects chosen in Westminster, that signal is lost — the money flows to whatever is politically useful rather than whatever customers genuinely want. Economists have a formal name for the breakdown that follows, but you don’t need it. You already know that a business runs best when decisions are made on the one honest test — “will this serve a paying customer?” — and that every pound redirected by political choice is a pound no longer answering that question.

Do that across a whole economy and you don’t get the growth the spending was supposed to buy. You get the opposite: fewer jobs, weaker investment, and a smaller pie to tax next year.

For small and medium businesses — the backbone of the UK economy — the effects are immediate:

In short: the policy sold as a way to fund public services ends up squeezing the very entrepreneurs who create the jobs and the wealth that pay for those services in the first place.

None of this is financial advice — just things worth weighing while you decide how to play a tax that’s now baked in for years:

Let wages and employment be settled where they’re settled best: in voluntary agreements between employers and the people they hire. Stop using a tax on jobs to fund spending that only ever grows. Bring deficits down so the state stops crowding out private capital, and let genuine market interest rates — not a committee’s guesswork — steer money toward its most productive uses.

Do that, and entrepreneurs are free to do the thing they’re best at: build, hire, and create wealth by serving customers — without a meter running on every job they create. That isn’t a utopian theory. It’s simply what happens when you stop taxing the behaviour you say you want more of.

Stay free,

Jean-Pierre

The Austrian Actor

P.S. The full archive will always be available at theaustrianactor.com