National Insurance hike: 125,000 more Britons on low incomes set to pay ‘stealth tax’

National Insurance rise is 'robbery’ says Sir John Redwood

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The Chancellor has been slammed for not raising the National Insurance thresholds at the rate of inflation. Currently, the minimum salary at which workers pay National Insurance is £9,568.

Mr Sunak will increase the income threshold at which people pay the levy by 3.1 percent to £9,880 from next month.

This is despite the Bank of England expecting annual inflation growth to hit 7.5 percent by April.

Research compiled by the Liberal Democrats, using figures from the House of Commons library found that between 95,000 and 125,000 fewer people would have to pay National Insurance if the threshold rose by 7.25 percent instead.

Also, the average worker paying National Insurance would have to fork out £45 less per year.

The Treasury is also netting another £2.4billion in 2022/23 – including the sum it gets from employers – by not raising the threshold by 7.25 percent.

The research suggested that employees face an extra £1.1billion hit through the “stealth tax” if Mr Sunak does not increase the current threshold by the level of expected inflation.

Liberal Democrat Treasury spokesperson Christine Jardine urged the Chancellor to act and to increase the threshold in line with expected inflation.

She said: “Families are facing the worst squeeze in living standards in 50 years, but the Conservatives are clobbering people with yet more stealth taxes.

“This unfair move will drag thousands more people into paying tax, while millions more will see their tax bills rise yet again next year.

“Meanwhile small businesses struggling to stay afloat face a hidden tax on their employees’ salaries.

“It is rubbing salt in the wound of the government’s broken promise not to raise National Insurance.

“Rishi Sunak must spike the hike, and offer families and businesses a lifeline by slashing VAT instead.”

National Insurance could cost the average worker a whopping £2,706 a year from April.

The average worker earning £30,000 a year will pay an extra £255 in National Insurance from April 6.

It will lift their annual NI bill to £2,706, a staggering nine percent of their salary.

That comes at the worst possible time as the cost of living soars.

The new 1.25 percent health and social care levy will be charged on top of standard NI of 12 percent, lifting the total to 13.25 percent.

Despite huge Tory pressure, Mr Sunak refused to cancel the hike in the upcoming budget.

He told Sky News: “Every penny of this tax goes straight to those things they care most about” – the NHS and social care.

But he did not rule out adjusting the payment threshold, which is currently much lower than the income tax personal allowance of £12,570.

The increase was designed to raise £12billion a year to fund social care costs and clear the post-Covid NHS backlog.

Pensioners will pay it from April 2023 on any income they earn in retirement, unless Prime Minister Boris Johnson and Chancellor Rishi Sunak yield to growing pressure to axe the increase.

Employees will pay it on earnings above £9,568 a year, and the self-employed will pay on profits above that level.

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