Experts are warning businesses and employees to brace themselves for a major rise in National Insurance payments in April.
Prime Minister Boris Johnson and Chancellor Rishi Sunak have confirmed that the plans will see employees, employers and the self-employed pay 1.25p more in the pound for National Insurance for a year as they look to boost NHS coffers following the pandemic.
Currently most workers pay 12 per cent of their income between £9,568 and £50,270 each year in National Insurance and two per cent of income above £50,270.
From 6 April, that will rise to 13.25 per cent on the lower scale and 3.25 per cent on earnings above that equating to a rise of 10.4 per cent under plans announced at last year’s Budget.
So, an employee on £20,000 a year will pay an extra £89 in tax. An individual on £50,000 will pay £464 more.
Owen Kyffin, director of accountants and business advisors Whitley Stimpson, said:
“This will come as a nasty shock to business owners and their staff, and they should be preparing for it now. The Government has borrowed hundreds of billions of pounds propping up the economy and the NHS during the pandemic and now it is pay-back time.”
The changes, which have been widely criticised by some politicians and business leaders, are expected to raise £12bn a year, which will initially go toward easing pressure on the NHS. In 2023, the increases will turn into a new Health and Social Care Levy which will represent a 1.25 per cent tax on earnings for employees, the self-employed and employers.
“Many businesses will simply pass on the increases by putting up prices which will fuel inflation – already at a 30-year high – and further increasing the cost of living. It is unlikely wages will keep up with these increases so many people will be feeling the pinch after April. It is worth speaking to your business advisor now to see how these changes can be accommodated.”