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 PM today revealed his highly-controversial plan to raise National Insurance by 1.25 per cent to cap the spiralling costs of elderly care.
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He broke the news today and said the hike will kick in for employers and employees from April 20 next year.
The increase means someone on £25,000 will now pay nearly £200 (£193) more per year, rising to £505 more for someone on £50,000.
The bump in NI bills will help fund a cap on care costs – now pensioners won’t have to pay more than £86,000 for this, while those with assets under £20,000 don’t have to pay a thing.
Revealing his plans to the Commons today, 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 per cent health and social care levy on earned income, hypothecated in law to health and social care with dividend rates increasing by the same amount.”
The plan to hike National Insurance Contributions (NICs) was first revealed by The Sun in July.
The hikes will hit the finances of around 25 million Brits.
It would also break 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.”
The National Insurance you pay in helps fund state benefits like the State Pension, sick pay and unemployment benefits.
How much could it add to bills?
You pay National Insurance when you’re employed and earning more than £9,564 a year, or £184 per week.
You then pay 12% on earnings over this amount and up to £50,268, or £967 a week.
A further 2% is paid on any earnings over this amount and the self-employed pay lower rates.
That means that the amount of National Insurance you pay depends on how much you earn – the more you make the more you pay.
Someone earning £15,000 a year for instance pays of NICs of £652, while another person earning an annual salary of £25,000 pays NICs of £1,852.
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In July, we looked at how a potential NIC rise of 1% could affect your tax bills.
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.
But overall, the increase to National Insurance will likely to 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 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.
National Insurance is not the same as income tax, and you pay this separately on your earnings too.
Tax rises are usually announced in the Chancellor’s annual Budget, with Rishi Sunak announcing a 25% corporation tax hike in March.
The Budget in March followed several emergency Budgets by Rishi Sunak to get the country through the coronavirus pandemic.
Boris Johnson refuses to answer question on manifesto commitment not to raise National Insurance
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