Edwina Currie defends National Insurance hikes
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Despite opposition, including from some Conservative MPs, the Prime Minister and Chancellor have confirmed that they will be pushing on with their plans to significantly raise the level of National Insurance from this April. The new tax hike will remain in place for the following 12 months from this point, but how’s this latest change going to affect workers? Are you within one the worst affected groups?
How much is National Insurance rising by?
As of April 2022, National Insurance contributions are poised to grow by 1.25 percent under plans originally approved by the Government last September.
What is National Insurance?
National Insurance contributions are a form of tax in the UK which are subtracted from your salary before you get paid.
The money helps to fund services, such as healthcare and the state pension.
In addition, it covers the costs of maternity plus sick and bereavement pay.
Only those who are employed and earning above a certain threshold are required to pay the tax, with the amount people pay determined by how much they earn.
You pay mandatory National Insurance if you’re 16 or over and are either:
- An employee earning above £184 a week
- Self-employed and making a profit of £6,515 or more a year
How long will the increase remain for?
The latest rise in National Insurance will stay in place for one year from this April. After this point, the extra tax will be collected as a new Health and Social Care Levy.
Who will be most affected by the latest hike?
Some critics have suggested that the increase will have a greater impact on the lower-paid and could add to inflation when house-hold budgets are placed under pressure from rising energy prices and food bills.
Warnings have also been issued by business chiefs that companies could offset the tax rise by raising prices.
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Earlier this month it was revealed that inflation – the rate at which prices are rising – was at a 30-year high after reaching 5.4 percent.
For context, a 1.25 percent increase in National Insurance will have the following impacts on those who are eligible to pay the tax:
- Workers on a salary of £20,000 will pay an additional £130 per year
- Workers on a salary of £30,000 will pay an additional £255 per year
- Workers on a salary of £50,000 will pay an additional £505 per year
- Workers on a salary of £80,000 will pay an additional £880 per year
- Workers on a salary of £100,000 will pay an additional £1,130 per year
What’s been the reaction so far?
Writing in last weekend’s Sunday Times, Mr Johnson and Mr Sunak defended their decision by stating “there is no magic money tree”.
They added: “We must go ahead with the health and care levy. It is progressive: the burden falls most on those who can most afford it.
“Every penny of that £39bn will go on crucial objectives – including nine million more checks, scans and operations, and 50,000 more nurses, as well as boosting social care.”
However, the Labour frontbencher Lisa Nandy has called on the Government to “rethink” the planned rise, adding Labour would be “doing everything that we can over the next few weeks to try and appeal to Tory MPs’ consciences”.
She told BBC One’s Sunday Morning programme: “You can’t possibly hit people with more taxes at the moment. It’s just simply not possible for a lot of people to survive.”
Elsewhere, the senior Tory backbencher Robert Halfon has suggested that the Government should instead look at windfall taxes on big businesses, or raising capital gains tax, in order to boost health spending after the Covid pandemic.
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