Rachel Reeves will hit 700,000 ‘working people’ with a £400 tax rise

‘Negative impact on flexible workforce’

Meanwhile, a 1pc rise would cost £221 in extra taxes.

Lucy Smith, owner and founder of Clarity Umbrella, said: “An increase in employers’ national insurance will inevitably have a negative impact on the ever-important flexible workforce.”

She added: “We may see the lower paid temporary workforce squeezed further on top of the cost of living crisis, making this way of working unsustainable.”

Labor promised in its manifesto not to raise income tax, national insurance or VAT. However, Ms Reeves has repeatedly claimed the promise only applied to taxes on “working people”, not employers.

In a speech on Friday, she said: “It is not possible to close the hole in our public finances without having to make difficult decisions. I am making the choice not to increase the key taxes paid by working people.”

According to data from the Freelancer and Contractor Services Association, the 700,000 workers who use an umbrella company currently contribute around £19bn each year to the Treasury.

A Treasury spokesman said: “We do not comment on speculation around tax changes outside of fiscal events.”