National Insurance: Young population to bear burden says Currie
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Middle income earners are set to be hit hardest by the Governments proposal to increase National Insurance by 1.25 percentage points from April. Although this increase doesn’t sound very dramatic, many people will “pay a lot more”.
Express.co.uk spoke exclusively with Fery Kaszoni from Income Tax UK, who explained what this will mean for millions of hard-working Britons.
He said: “The rise in National Insurance couldn’t have come at a worse time for the country, particularly its low to middle-earners, who feel the pinch of taxation without the benefits of higher pay.
“Workers are already financially stretched, as soaring wholesale oil costs have allowed bills to skyrocket to impossible levels for the average worker.
“The Government’s decision to scrap VAT on energy bills – which has likely been buried in the news about Downing Street’s potential breaches of Covid restrictions – means that many will have to battle overwhelmingly high household bills alongside the 1.25 percent increase in National Insurance.
“It is worth pointing out that while a 1.25 percent increase doesn’t sound very dramatic, it just refers to a basis point rise, and you’ll pay a lot more.”
He explained that families across the UK have faced some of the harshest hikes in living costs over the past few months.
With inflation at the highest level in 30 years and energy bills set to jump £600 this year, many households simply may not be able to cope with further increases in tax.
There is no doubt that many people will face real hardship if steps are not taken to ease the impossible cost of living for a large proportion of the UK, he said.
Millions of people will have to pay more despite finances being squeezed already.
Research from Income Tax UK found that that online searches for ‘can’t pay tax’ skyrocketed to nearly 10 times the average volume in one day when Prime Minister Boris Johnson vowed to trigger the National Insurance increase.
This demonstrates the concern these changes are set to bring about for those worried about how to cover the cut to their pocket.
Mr Kaszoni continued: “If you earn £20,000 you could see a £130 increase in what you pay, and you’ll be spending £1381 overall a year on NI – seven percent of your salary.
“Similarly, if you earn £30,000 – the average wage in the UK – you will be paying £255 extra on NI and paying £2706 for National Insurance – nine percent of your salary.
“What we’re also seeing is that the National Insurance hike doesn’t affect the very high earners nearly as much as lower earner and those in the middle.
“Someone on £100,000 a year will dedicate just seven percent of their salary to National Insurance, while someone on £20,000 a year will also dedicate seven percent of their salary to National Insurance, but with far less income leftover.”
He explained that the reason that those on salaries of £100,000 pay a much smaller percentage of their overall income towards National Insurance is because a large majority of their earnings (anything above £50,000) is taxed at the two percent rate of National Insurance, rather than the 12.5 percent basic rate.
This means that a vast proportion of their income only faces a two percent levy.
Those earning less are stuck with the 12.5 percent NI rate, with earners on £50,000 hardest hit because they don’t earn enough to incur the smaller two percent charge, but earn more than those on £20,000 and £30,000 and are therefore charged more NI, he said.
The Prime Minister and Chancellor Rishi Sunak are reported to be pressing ahead with the National Insurance increase in April despite concerns being expressed that millions are struggling with their finances.
They said the rise is necessary to pay for the NHS and social care, but commentators are concerned that those on an average income will be hit hard.
Under the new plans, employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance from April 2022 for a year.
However, low-income earners and Britons on an average salary will end up paying a bigger proportion of their pay packet.
Express.co.uk has contacted HM Treasury for comment.
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