National Insurance: Boris Johnson ignores calls to stop the increase | Personal finance | Finance
Last year, Chancellor Rishi Sunak announced the government’s plan to increase national insurance payments for workers and employers by 1.25 percentage points. This latest tax hike is expected to pay for government welfare plans ahead of the introduction of the Health and Social Care Tax. However, MPs passed a motion yesterday (8 March) to scrap the National Insurance hike before it is implemented in April.
Labor argues the government’s policy decision will make the cost of living crisis worse and cost families around £500 a year.
Criticism is particularly aimed at the increase in National Insurance payments in light of soaring energy bills, which are expected to get worse for households due to Russia’s invasion of Ukraine.
A Labor motion in the House of Commons called on Boris Johnson to drop the hike, saying it had been approved ‘at the nod’ without a formal vote.
It means it passed a vote in the Commons, but it is a non-binding course of action which Mr Johnson does not need to act on.
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The motion read: ‘That this House call on the Government to reverse its planned 1.25 percentage point hike in National Insurance contributions which will cost families an average of £500 a year from April 2022.’
In the House of Commons, the government defended its position and cited the potential benefits of such a tax increase.
Addressing MPs, Treasury Minister Simon Clarke said: ‘This is transformative policy that will tackle serious and long-standing issues.
“To fund such a large increase in permanent spending, we had to make a difficult but responsible choice to raise taxes.
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Tom Selby, head of pension policy at AJ, provided a hypothetical example of how households will be affected by the proposed tax hike.
Mr Selby explained: “Take someone working with a total taxable income of £30,000.
“In 2021/22 they would pay National Insurance at 12% on earnings between £9,568 and £30,000 leaving them with a total NI bill of £2,451.84.
“In 2022/23 the threshold at which employees start paying National Insurance increases to £9,880, so NI at 13.25% above that level would leave them with a total NI bill of £2,665.90 .”