BRITS will have to pay up to hundreds of pounds more every year for their National Insurance bill following a tax hike by Boris Johnson.
The Prime Minsiter revealed his highly-controversial plan to raise National Insurance by 1.25% to help cover the spiralling costs of elderly care.
Here's everything you need to know about the tax hike, when it's happening and how it will affect your finances.
How are National Insurance rates changing?
You pay National Insurance when you're employed and earning more than £9,568 a year, or £184 per week.
Self-employed people earning more the £6,515 also pay national insurance contributions.
The hikes will hit the finances of around 25 million Brits, who will have to pay 1.25% extra in NI contributions.
This means rates will rise from 12% on earnings between £184 to £967 a week to 13.5%.
NI charges on earnings over this amount will rise from 2% to 3.5%.
How much more National Insurance will I pay?
The amount of National Insurance you pay depends on how much you earn – the more you make the more you pay.
Currently, someone earning £15,000 a year for instance pays NICs of £652, while another person earning an annual salary of £25,000 pays NICs of £1,852 each year.
Figures from accountancy Blick Rothenberg for The Sun show how these NICs will go up when the 1.25% hike rolls in from April next year.
On earnings of £10,000, it will be £5 a year more, and on earnings of £25,000, £193 more.
NICs on earnings of £35,000 will increase by £318 a year, and on a salary of £50,000, will go up by £505.
The average salary in the UK is £29,900.
ABC Finance calculates that those on this wage will be forced to pay an increase of £255 a year and £21.25 a month in National Insurance
But overall, the increase to National Insurance will likely hit those on lower incomes compared to the wealthier in society, the accountancy firm said.
That's because NICs are calculated on a weekly or monthly basis, so seasonal workers or those on zero hours contracts may have to pay despite earning less than the annual threshold.
National Insurance is not the same as income tax, and you pay this separately on your earnings too.
When will I start paying more National Insurance?
Boris Johnson said the hike will kick in from April next year when the new tax year starts.
Tax rises are usually announced in the Chancellor's annual Budget, such as when Rishi Sunak announcing a 25% corporation tax hike in March.
But the plan to hike National Insurance Contributions (NICs) was first revealed by The Sun in July.
National Insurance rates last increased in 2011, rising from 11% and 1% to the current rate of 12% and 2%.
The thresholds at which you pay each rate usually rise each year.
Why is National Insurance rising?
The National Insurance you pay in helps fund state benefits like the State Pension, sick pay and unemployment benefits.
The bump in NI bills will help fund a cap on care costs – meaning that pensioners won't have to pay more than £86,000 , while those with assets under £20,000 don't have to pay a thing.
Revealing his plans to the Commons, Mr Johnson said: "It will be irresponsible to meet the costs from higher borrowing and higher debt.
"So from next April we will create a new UK wide 1.25% health and social care levy on earned income, hypothecated in law to health and social care with dividend rates increasing by the same amount."
It breaks the Tory manifesto, which reads: "We promise not to raise the rates of income tax, National Insurance or VAT."
Former Prime Minister John Major described the move as "regressive".
“I don’t think they should use national insurance contributions, I think that’s a regressive way of doing it," he said.
"I would rather do it in a straightforward and honest fashion and put it on taxation.”
Meanwhile former chancellor Lord Hammond slammed the plan.
He told Times Radio: “Economically, politically, expanding the state further in order to protect private assets by asking poor people to subsidise rich people has got to be the wrong thing to do.”
Up to 700,000 self-employed face higher tax bills under Boris Johnson’s social care reforms.
Working pensioners will have to pay a new tax under the plans too.
Meanwhile council tax bills could also rise at the same time in a double whammy for households.
We pay for your stories!
Do you have a story for The Sun Online Money team?
Email us at [email protected]
Source: Read Full Article