Manchester United could have saved hundreds of thousands of pounds in tax by sacking Erik ten Hag ahead of the Budget today.

Analysis by audit and tax consultancy RSM UK found the decision to remove Ten Hag on Monday will have spared them from the expected raid on National Insurance by Chancellor Rachel Reeves.

Ms Reeves is expected to target National Insurance contributions paid by employers with a rise of between 1pc and 2pc.

The details of Ten Hag’s severance package are not known, but had it been worth ￡10m a 2pc tax increase today would mean the club could have saved around ￡200,000, RSM said.

The erstwhile United manager parted ways with the club after a disappointing start to the Premier League season.

While there is no suggestion the club’s decision to remove Ten Hag was motivated by tax changes, the United board’s decision to act swiftly could pay dividends.

‘Colossal financial hit’

The case illustrates the colossal financial hit firms face from rising payroll costs brought on by higher taxes.

The last change to employer National Insurance contributions was in November 2022 amid the “mini-Budget” that undid Liz Truss’s premiership.

Ms Truss reduced the rate of tax from 15pc to 14pc and the tax cut was kept by Rishi Sunak. Increasing this by just one percentage point could raise ￡9.2bn for the Treasury.

However, this would be halved to ￡4.7bn if the cost were passed on to employees via wage reductions, along with taking hundreds of pounds from many workers’ payslips. The Chancellor could raise the rate by up to two percentage points.

Any further changes to the tax regime would likely come with a six-week grace period, which would allow payroll software to be updated.

Employers are likely to pay the current rate of National Insurance on any settlements finalised with outgoing staff during that period, though this will depend on when an employee’s last payment is made, RSM UK said.

The firm said employers considering reducing staff numbers may be inclined to accelerate the process before any increases to National Insurance contributions.