Middle-income earners ‘will be hardest hit’ by National Insurance hike | National Insurance

0

Earners earning £100,000 a year could end up paying proportionally less in National Insurance than those on middle incomes if a planned increase materializes in April, it has emerged.

Figures produced by the Tax Calculator UK website show that those earning £100,000 a year will only pay 7% of their overall salary in National Insurance Contributions (NICs) – the same proportion of their income as someone who earns £20,000 a year.

The Prime Minister and the Treasury have come under intense pressure to drop or at least postpone the £12billion increase in NICs – introduced to cover the shortfall in social care funding – amid the cost of living crisis continues to worsen.

While the Treasury has repeatedly claimed the increase is “gradual”, figures released by the online tax calculator on Friday show workers earning between £30,000 and £50,000 will be by far the hardest hit.

It calculates that someone earning £50,000 a year will pay £5,086 a year in NICs alone after April – an increase of £505 – equivalent to 10% of their gross salary.

While someone earning £100,000 a year would be expected to pay the highest National Insurance bill – £7,008 a year (an increase of £1,130), the proportion of their pre-tax income paid in NICs will only be by 7%. Those earning £30,000 a year will pay 9% of their gross salary in NIC.

“The increase in National Insurance will have a huge effect on workers’ incomes in 2022, especially given soaring energy bills and the fact that inflation is at its highest level in 30 years” , said a spokesperson for Tax Calculator UK.

“These data give us compelling insight that middle and lower incomes will be significantly more squeezed by rising NICs than those at the top.

“People earning some of the highest salaries in the country are expected to pay the same percentage of their salary as someone on £20,000, despite earning five times as much.”

From April, NICs are expected to be charged at 13.25% on most income up to £50,000, but only 3.25% on income above that threshold.

The figures will be seized by Labour, which has called for a fairer and more progressive way of funding social care. Shadow Chancellor Rachel Reeves told the BBC on Friday morning it was the “wrong tax at the wrong time” and described it as a tax on “ordinary workers and on jobs”.

The NIC increase was announced by Chancellor Rishi Sunak in last fall’s budget and will hit wages on April 6, alongside a four-year freeze on income tax thresholds.

The combination will leave the average household £600 a year worse off in 2022-23, equivalent to 1.4% of their disposable income, according to the Resolution Foundation think tank.

Business groups are also furious at rising employer bills. On Friday, the Institute of Directors joined calls from other business leaders to scrap the tax hike.

A Treasury spokesman said: ‘It is not true to say that high earners are the least affected by the health and social care tax. Anyone whose income is above the primary threshold will pay a flat rate of 1.25% on their income.

“More than half of the health and social care tax revenue will come from the richest 15% of the population, while more than 6 million low-income people will be completely exempt.”

Share.

Comments are closed.