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More than 750,000 low-paid hospitality workers in hotels and restaurants will become part of the national insurance system due to changes made to the budget, a trade group has warned.
Chancellor Rachel Reeves said in last year's Budget that she would increase employers' national insurance contributions in a bid to raise £22 billion for the Treasury.
He also said he would lower the threshold for paying the tax, from earnings of £9,100 a year to £5,000 a year, meaning hundreds of thousands of employers will now pay the rate.
Kate Nicholls, chief executive of UK Hospitality, said: “The move to employer NICs is one of the most regressive tax changes ever made.
“The scale of this change is unprecedented, as for the first time three quarters of a million people will be subject to this employer tax, and the scope of the impact will be enormous.
“At a time when we saw hospitality as the biggest driver of economic growth in November, it is completely wrong to punish a sector that has such growth potential.”
Ms Nicholls warned this change to national insurance in the Budget could cost the hospitality industry £1 billion.
Business owners have already warned that they will have to raise prices to cope with increased expenses, as well as the planned increase in the minimum wage.
Brewer Young's said last week it will increase its prices by 3.5 per cent following the chancellor's plan to increase business taxes.
The move will add around 20p to the price of a London pint, taking it to around £6.50. A pint in the rest of the UK will cost around 17p more.
The trade body previously estimated that national insurance and the minimum wage increase will add £2,500 to the cost of employing a full-time member of staff for its members each year.
Last week, research suggested that two-thirds of the country's major retailers will also have to increase prices.
The British Retail Consortium, whose members include giants such as Marks & Spencer and Boots, said 67 per cent of the 52 finance chiefs it surveyed said they would raise prices in response to increases in employers' national insurance contributions. starting in April.
Just over half said they would reduce the number of paid hours and overtime, while 46 percent said they will have to reduce staffing in stores and 31 percent said rising costs would lead to greater automation.
A Treasury spokesperson said: “Without our action, business rates relief for retail, hospitality and leisure would have ended completely in April this year.
“Instead, we are protecting one in three businesses from paying business rates, extending a 40 per cent relief for 250,000 properties in retail, hospitality and leisure and introducing a new permanently lower business rate in 2026, while that more than half of employers will see a cut or no change to their National Insurance bills.”
“Our Plan for Change will also enable Britain to build up, unlock investment and support businesses so we can improve the lot of all parts of the country.”
