The Coronavirus pandemic has left a scar on the NHS, and it’s not over yet. To help the NHS recover, the Government has announced an increase to your NI contributions in a U-turn on their manifesto of 2019, stating “no NI increase”, despite criticism from within the Conservative party.
National Insurance Overview
First introduced in 1911, the aim of National Insurance was to provide a fund for employees out of work or in need of medical treatment. It is a tax collected from both employers and employees and the self-employed pay a contribution calculated on their profits. The tax collected by this method while set aside for benefits, the state pension, and the NHS, can be borrowed by the Government for other projects.
What Is The Proposed Increase?
Employees, employers, and the self-employed will pay 1.25p more in every pound for National Insurance from April 2022 – April 2023, when the NI rate will return to its current rate and the new Health & Social Care Levy will be introduced. It is important to note that under the Health & Social Care Levy will also be paid by state pensioners who remain in employment.
What Does The Increase Mean For Your Pocket
An employee earning £20,000 per year will pay an extra £130 in NI while an individual earning £50,000 per year will pay a further £505.
What Is The Purpose Of The Increase?
The Government estimate that the rise will generate an additional £12bn per year which will initially be plunged into easing NHS pressures following the pandemic.
The following 3 years will see a proportion then put into the social care system.
The Government aims to ensure that those who incur care costs in England pay no more than £86,000 from October 2023 excluding accommodation and food. Where individuals have assets worth less than £20,000 their care will be fully paid for by the state, and where assets are worth between £20,000 – £100,000, care cots will be subsidised.
If you wish to discuss tax efficiencies call the team.
MJB Avanti | (08000) 388 799