Working families will be £3,536 worse off over this parliament because of Labour’s national insurance jobs tax, the Tories have warned. They said the £25 billion tax hike, which takes effect on Sunday, will slash salaries, “punish” businesses for hiring part time workers and heap costs onto already struggling businesses.

It comes as households face across-the-board bill rises from Tuesday. Tory leader Kemi Badenoch MP said: “Rachel Reeves has gambled with the economy leaving us dangerously vulnerable to American tariffs. Labour’s unprecedented borrowing spree and record levels of tax means she has pulled the handbrake on economic growth. The Prime Minister might think this is all just pocket money, but Britain’s working families will certainly notice the £3,500 Labour ministers have cost them.

“Labour didn’t have a plan and now they have snatched winter fuel payments from pensioners, introduced emergency welfare cuts, and from this weekend will be hiking taxes on work through their jobs tax.”

The rate that employers pay in contributions will rise from 13.8% to 15% on a worker's earnings above £175 from April.

The threshold at which employers start paying the tax on each employee’s salary will be reduced from £9,100 per year to £5,000

Hospitality businesses now face an additional £1.9 billion in wage costs, £1 billion of employer National Insurance Contributions (NICs) and £500m in business rates as a result of business rate relief being lowered from 75% to 40%.

Seven in 10 hospitality businesses say they will have to reduce their employment levels as a result, risking job losses and lost income for workers.

A third will reduce trading hours and 15% believe they will have to close at least one site.

Kate Nicholls, chief executive of UKHospitality, said: “The costs hitting hospitality this month are eye-watering, and the impacts it will have on businesses, teams and communities are stark.

“We’ve already seen a chilling effect on investment plans and job creation – all of which have been put on hold or shelved.

“As costs begin to bite, we’ll see venues having to tighten their belt even further through restricting trading hours or, in a worst-case scenario, cutting jobs.

“None of this helps the Government’s ambitions to drive growth or get people back into work. It needs sectors like hospitality to achieve both of those goals, but with disjointed tax and welfare policies, that is looking more difficult than ever.

“Hospitality has the ability to generate socially productive growth and create jobs for everyone, everywhere, but this level of cost ties our hands behind our back. I urge the Government to work with us to bring forward a plan for hospitality that addresses these issues and backs the sector to serve Britain and create places where people want to live, work and invest.”

The Institute of Directors’ (IoD) economic confidence index, which measures business leader optimism in prospects for the UK economy, rose slightly to minus 58 in March from minus 64 in February.

Anna Leach, chief economist at the IoD, said: “With the NICs and minimum wage increases now coming into effect, headcount and investment intentions remain well below the average of the last decade, albeit a little higher than they were.

“And business leaders are highly concerned about costs – with three quarters saying that employment costs are the biggest cost driver they face.”

The Government said eligible full-time workers are set for a pay boost of up to £117 from this month because of an increase in the National Living Wage, which comes into effect on Tuesday.

Deputy Prime Minister Angela Rayner said: "This pay rise for over 3 million of the lowest paid workers was a priority for this government and means we're already giving hard working people more money in their pockets and a proper wage increase worth over twice the rate of inflation.

“These changes are part of our Plan for Change – to raise living standards for people across the county, including apprentices and young people, giving them more job security and the huge pay boost they deserve too.”