Planned National Insurance tax increase faces criticism

Employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance from April 2022.

This works out to a 1.24 per cent additional cost for employers, for earned income and for dividends. Only those on low income, earning less than £10,000 a year, will avoid the charge.

The increase would be phased in via payroll but is eventually set become a separate tax in its own right.

The Government has said from April next year, National Insurance will return to its current rate and the extra tax will be collected as a new health and social care levy.

Martin Gurney is a tax partner with the Haines Watts accountancy firm in Swindon. He said: “We already know that someone had got to pay for the Government funding that has been introduced to support the economy.

“Most of the commentary has been - and I share the view - that potentially this is following on too closely from the withdrawal of the coronavirus job retention scheme, which is being phased out by September 30, with the new tax being brought in six months later from April 2022

“There are already concerns that supply chain issues and government coronavirus support programmes around the world are likely to fuel inflation. These new measures will further fuel price inflation with employers seeking to pass cost increases on to consumers.

“These increases ultimately impact lower income households disproportionately.”

Fiona Scott is the owner of Forgotten Ltd, a firm which campaigns for fairness and equality for small businesses in the UK that did not receive financial support through the government’s support packages.

She said: “I’m spitting feathers because this increase will affect small limited companies like mine who got little or no support during the pandemic.

“But now we’re not being forgotten when it comes to paying the bill. We get the National Insurance rises like everyone else and a rise in dividend tax as well. You couldn’t make it up.”