Millions of households 'could have £200 wiped from bank accounts from November'

UK households have been warned they could potentially face pay cuts from November. There are fears employers could cut wages or even lay off some staff if forced to pay more National Insurance after the Budget.

That looks set to be one of the key announcements from the Chancellor Rachel Reeves on Wednesday. It would mean employers having to pay more National Insurance contributions, rather than workers.

But business experts fear that to make up for this and recoup losses, some firms could reduce pay to staff, scrap pay rises or cut jobs. They explained that, for example, a business looking to ensure they don't lose out from National Insurance increases could reduce the salary of someone earning £30,000 to £29,818.

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But it remains unclear how individual firms will respond but experts predict pay increases could be shelved as a result. The Chancellor looks set to hike National Insurance for businesses after ruling out direct tax increases for "working people".

But Tom Clougherty, IEA executive director and Ralph Harris Fellow, said: "The Government's rumoured plan to increase employer National Insurance contributions highlights two important principles of tax policy. First, the incidence of a tax doesn't always fall on the person who pays it.

"When we tax businesses, it is often workers who end up bearing the burden in the form of lower wages. This means the idea of tax hikes that don't hit ‘working people’ is little more than a political fantasy. Second, tax affects behaviour – and the choices people make in response to a tax increase (or a tax cut) can have a significant impact on how much revenue is raised.

"A good tax system would seek to be as transparent as possible about who really foots the bill, while also seeking to minimise its impact on economic decision-making. We are a very long way from that ideal at the moment."