Rishi Sunak has announced that he will raise the National Insurance by £3,000 as he was forced to soften the blow of his tax hike on working people.
The Tory Chancellor used his Spring Statement to match the NI earnings threshold at which workers will start having to pay with the Income Tax, following months of pressure amid a looming cost of living crisis.
It means that workers will now start paying National Insurance on earnings above £12,570 a year, which is up from a planned £9,880 a year from April 6. It will take some of the lowest earners out of paying the tax, and save those still paying £330 a year.
Chancellor Rishi Sunak also revealed he will cut the basic rate of income tax from 20 pence in the pound to 19 before the end of the current Parliament, in 2024, the Mirror reports. But for millions of people the saving looks set to be cancelled out by a £12bn rise in National Insurance that is coming on April 6, despite furious pleas to scrap it.
That rise will hit working people as the Treasury looks to cut Covid backlogs in the NHS and begin funding social care. Employees will pay 1.25p more in the pound on earnings above the threshold, a rise from 12% to 13.25%.
The IFS think tank had estimated the tax hike would cost £20,000 earners £127 extra per year, £30,000 earners £252 a year and £50,00 earners £502 a year.
Today's announcement will also do nothing to help those who are out of work due to sickness or redundancy - who will get a benefits rise worth less than half of inflation.
Experts had warned a benefits rise would help the poorest by four times more than scrapping the National Insurance hike. But NI has been the focus of Tories who worry the tax burden is too high.
People on benefits will get a rise of just 3.1% on April 11 - worth only £10.07 a month extra on Universal Credit. That is months after an £85-a-month cut to Universal Credit.
Those supportive of Boris Johnson argue the new National Insurance levy is "progressive" as the wealthier pay more. The IFS said £80,000 earners would pay an extra £877 under previous calculations.
But Tory backbenchers hostile to new taxes baulk at the plans as the tax burden hits its highest in decades.
