Someone earning £30,000 would have to pay an extra £644 a year in National Insurance if the larger increase is carried out, experts at a think tank are warning consumers
Image: Getty)
A planned government hike to National Insurance actually needs to double to properly pay for social care, experts warn.
Last month the Conservatives announced that the amount of National Insurance paid by businesses and individuals will rise from 12% to 13.25% next April.
The aim is to help fund social care – despite this being a breach of the 2019 Tory manifesto.
But the 1.25% increase will not be enough, according to the Institute for Fiscal Studies (IFS) think tank today.
It said this would need to rise to at least 3.15% by the end of the decade to pay the government’s social care bill properly.
Someone earning £30,000 a year will pay £2,451 in National Insurance in the current tax year – 2021/2022.
That is due to rise to £2,707 in the next tax year when the level rises from 12% to 13.25%.
How is the cost of living squeeze affecting you? Message mirror.money.saving@mirror.co.uk
But that bill would be £3,095 with a 3.15% increase to National Insurance.
The National Insurance hike will appear as a ‘health and social care levy’ on payslips from 2022.
(
Image:
AFP via Getty Images)
An IFS statement said: “If the new health and social care levy is to rise to meet future health and social care pressures then we estimate that its rate could need to more than double from 1.25% to 3.15% by the end of this decade.
“Other revenue-raising options are of course available but, regardless of the specifics, demographic pressures point to a need for future tax rises, not tax cuts.”
The IFS said the government is currently raking in its highest peacetime tax take ever.
“These are more the inevitable consequences of population ageing and pressures on health and care spending, than they are consequences of the pandemic,” it said. “Tax rises that were always inevitable have been smuggled in under cover of the pandemic.”
National Insurance is a tax on earnings, paid by both employed and self-employed workers.
You build up contributions during your working life and this then allows you to qualify for the state pension and also certain benefits.
You don’t pay National Insurance if you earn less than £184 per week, which is the equivalent to £9,568 each year.
Above that level and you pay 12% – rising from next April.
You have to pay National Insurance if you’re 16 or over and either an employee earning above £184 a week, or self-employed and making a profit of £6,515 or more a year.
How the energy bills crisis affects you
Under the current rules, once you reach state pension age, you no longer need to keep paying National Insurance.
If you have an employer, or you’re self-employed but work for an employer, you’ll pay Class 1 National Insurance contributions.
The National Insurance hike also means council tax could go up in some regions , MPs think.
This is because councils share a £2billion pot of government cash to help them pay their National Insurance bills for directly-employed staff.
But many councils also outsource services like bin collections to private companies.
These councils face huge bills for National Insurance contributions, and cannot use the £2billion pot.
Tory MP Geoffrey Clifton-Brown told the Public Accounts Committee of MPs last moth that councils could have to hike council tax to help.
He said: “A waste collection company providing 100% of their service to the local authority — will they or will they not have all their NICs reimbursed?
“If they don’t, the cost goes up for local authorities and it will then have to go on to council tax payers.”
Read More
Read More
Discussion about this post