The cost of providing business cars (and other benefits) for employees will rise from April next year as the Chancellor confirmed he plans to raise the main rate of National Insurance contributions by 1%.

The government had faced criticism that this was a “tax on jobs” and would hit lower paid workers hardest.

The announcement was first made in the pre-Budget Report in December last year when a further 0.5% increase was added to the original 0.5% increase from the pre-Budget Report in 2008. Both increases are for April 2011.

Although the threshold for individual increased NI payments will be £20,000, businesses will have to pay extra Class 1A contributions at a new rate of 13.8% on all taxable benefits.

There were no changes to VAT rates or income tax rates and other changes to income tax, including a new 50% rate, remain as announced in the Pre-Budget Report.