Boris Johnson has ruled out scrapping an increase to national insurance contributions, declaring that the tax hike will go ahead “no ifs, no buts”.
SEE MORE ‘There is a way out of the cost of living crisis for Boris Johnson’ SEE MORE How high could UK inflation rise in 2022? SEE MORE Cost of living crisis: the squeeze continues
Downing Street was forced to take a “hardened position” amid rumours that the prime minister was “wobbling” on the tax hike, The Telegraph reported. Concerned Conservative MPs have “urged him to delay or cancel the tax increase”.
The pressure on No. 10 was ramped up when defence minister James Heappey last night admitted that people were “feeling the squeeze” and said the government would “need to do a lot” to alleviate a cost of living crisis during an appearance on BBC Question Time.
Government split
Backbench Tory MPs have long opposed the hike in National Insurance contributions. But Johnson has the support of his neighbour on Downing Street.
His “no ifs, no buts” intervention came as the Treasury was “becoming increasingly alarmed” that the prime minister might “scrap the National Insurance rise in a desperate attempt to placate rightwing Tory MPs as he fights to save his job”, The Guardian said.
Chancellor Rishi Sunak has “privately stressed to MPs that the tax rise must go ahead as planned”, the paper added. A “frontbencher who has met him in recent days speculating the chancellor’s position could become untenable if Johnson seeks to overrule him”.
The wider party, however, remains furious about the plan. Robert Halfon, chair of the education select committee, has told the government to “go back to the drawing board”.
Senior backbench MPs Robert Jenrick and Mel Stride have also “called for the increase to be delayed”, the BBC said. Jenrick has said that 2022 would have been “exceptionally hard” for families even before the planned tax hike.
At a briefing with reporters today, a No. 10 spokesperson said “the prime minister and chancellor are fully committed to introducing the health and social care levy in April”.
“We’ve spoken before about why we are doing that, in order to give the NHS the funds it needs to tackle the backlog that has built up, as well as tackling the long-term issue of social care,” they added. “So as I say, we are committed to introducing that in April.”
How it works
The tax will kick in from April 2022 as a rise in National Insurance for employees and employers, and will then become a separate tax on earned income from 2023 – appearing on an employee’s payslip as a “Health & Social Care levy”.
The increase is a part of “the biggest shake-up of social care in decades”, said The Telegraph. The government is also introducing a new cap of £86,000 for the cost of social care over a lifetime, and people with assets between £20,000 and £100,000 will be eligible for means-tested social care funding for the first time.
Those with savings of less than £20,000 will be eligible to receive fully funded care, while those with savings between £20,000 and £100,000 can get partial support.
Although the new social care reforms will apply only to England, the tax changes will affect the whole of the UK. But the income from the levy will be distributed across the four nations.
According to the government, Scotland, Wales and Northern Ireland will get an extra £1.1bn, £700m and £400m in funding respectively by 2024-25.
“However, health and social care are devolved and differ significantly, meaning issues such as the cap and floor for people’s personal outgoings on care will also vary,” The Guardian reported.
Breaking down the figures
Paying a National Insurance contribution is mandatory 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.
From April 2022:
the current 12% rate on earnings between £9,564 and £50,268 will rise to 13.25%the current 2% rate on earnings over £50,268 will rise to 3.25%
employers will also have to pay more, contributing 15.05% in National Insurance on employees’ earnings over £170 per week, up from 13.8% now.
“People who earn under £9,564 don’t have to pay National Insurance or the new levy,” the BBC reported. But unlike National Insurance, the new levy “will also be paid by pensioners who work”, the broadcaster added.
Impact on earners
The hikes mean “millions of Brits will be forking out up to hundreds of pounds extra each year”, said the Daily Mirror.
According to analysis by financial services group Hargreaves Lansdown, this is how the changes will affect take-home earnings:
£10,000 salary: £52 paid now; £57 with 1.25% increase – £5 extra each year£20,000 salary: £1,252 paid now, £1,382 with 1.25% increase – £130 extra each year
£30,000 salary: £2,452 paid now; £2,707 with 1.25% increase – £255 extra each year
£40,000 salary: £3,652 paid now; £4,032 with 1.25% increase – £380 extra each year
£50,000 salary: £4,852 paid now; £5,357 with 1.25% increase – £505 extra each year
A major criticism levelled at the National Insurance hike is that the anything earned above £50,000 is taxed at a rate of just 2% – so the increase will have a proportionally smaller impact on the highest earners.
Spread the love & Comment on Social Media !