Families who are already struggling financially with rising household bills are set to face even more challenges from April onwards.
Francesca Hutcheson, Tax Director here at Dyke Yaxley warns that the planned increase in National Insurance could prove very difficult for many people.
“The increase has now been confirmed for this April, and it’s a move that’s likely to leave middle income families disproportionately worse off.
“Despite speculation that the increase would be set aside in view of increasing inflation, the Prime Minister and Chancellor Rishi Sunak have said the increase is ‘the right plan’ and ‘must go ahead’.”
Francesca says under the plans, employees, employers and anyone who is self-employed will all pay 1.25p more in the pound for National Insurance from April 2022 for a year.
After that time, the additional tax will be collected as a new Health and Social Care levy, and the revenue applied to raise funds for improvements to care services.
“For someone earning £20,000 a year, the change is likely to cost just under £2 per week, and for someone earning £50,000 a year, it’s likely to cost them around £9 per week – or just under £500 per year.
“People earning under £9,880 a year will not have to pay National Insurance and so won’t have to pay the new levy.”
Francesca says the increase was expected to raise around £12billion a year in additional tax from employees, employers and self-employed individuals.
“Over the course of the average person’s working life, the additional contributions are still expected to be significantly less than the average cost of care in later life.
“But this is unlikely to sit well with families who are already under pressure with rising household bills and outgoings.
“If you’re concerned about how the changes will affect you, it’s important to seek professional advice as soon as possible.”