Insurance

Rishi Sunak’s ‘stealth tax’ forces 125,000 more working poor to pay national insurance

The Chancellor has been criticized for not raising National Insurance thresholds to the rate of inflation – a move which today’s research shows will leave the average worker paying £45 more a year

Chancellor Rishi Sunak has been charged with a new stealth tax

Rishi Sunak is accused of imposing a ‘stealth tax’ that will see nearly 125,000 of the poorest workers pay National Insurance.

The minimum wage at which workers pay the soon to be increased tax will rise from £9,568 to £9,880 a year next month.

It’s better news than the income tax threshold, which is frozen for four years in a stealth tax expected to raise more than £12billion.

Student loan thresholds are also frozen, forcing graduates to spend a greater proportion of their income on repayments as wages and prices rise.

But the rise in the NPI threshold is still lower than inflation. The National Insurance threshold rises by 3.1% – despite inflation at 5.5% and fears it could soon exceed 8%.

House of Commons Library research for the Lib Dems found that between 95,000 and 125,000 fewer people would have to pay National Insurance if the threshold were raised by 7.25% instead.







National Insurance threshold rises 3.1% – despite inflation at 5.5% and fears it could soon top 8%
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Picture:

Tayfun Salci/ZUMA Press Wire/REX/Shutterstock)


And the average worker paying National Insurance would have to pay £45 less a year.

The Treasury also gains a further £2.4bn in 2022/23 – including the sum it receives from employers – by not raising the 7.25% threshold.

It’s a similar problem to benefits and pensions, which are also only increasing by 3.1%. The figure matches what inflation was like last fall – but it has since spiraled out of control.

Liberal Democrat Treasury spokeswoman Christine Jardine said: ‘Families are facing the worst pressure on living standards in 50 years, but the Tories are hitting people with even more stealth taxes.

“This unfair decision will result in thousands more people paying taxes, while millions more will see their tax bills rise even further next year. Meanwhile, small businesses struggling to stay afloat are facing a hidden tax on the wages of their employees.

“It stirs salt in the wound of the government’s broken promise not to increase national insurance. Rishi Sunak must increase the hike and offer families and businesses a lifeline by reducing VAT instead.

National Insurance itself will increase from 12% to 13.25% from April 2022.

Despite huge pressure from Tories, Rishi Sunak today refused calls to cancel the hike in this Wednesday’s spring declaration.

He told Sky News: ‘Every penny of this tax goes straight to the things they care about most’ – the NHS and social care.

But he has not ruled out adjusting the payment threshold, which is currently well below the personal income tax abatement of £12,570.

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