The UK government has announced a 1.25% National Insurance increase to spend on the NHS and social care. Prime Minister Boris Johnson introduced new tax plans for employees, businesses and a few investors. It is an attempt to improve social care and health care funding issues. It will become a separate and permanent health and social care levy after April 2023.
In his defence, Prime Minister said “the global pandemic was in no-one’s manifesto; It would be wrong for me to say that we can pay for this recovery without taking the difficult but responsible decisions about how we finance it,”. Although, it has incensed some of his party members by breaking an election promise.
From April next year, the NICs will be raised by 1.25% for employers, employees and self-employed workers for just a year. It will include Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) NICs. Those who are above the State Pension Age won’t be affected by these changes.
People who are above state pension age and earning profits from self-employment or employment income of more than or equal to £9,568 will also be charged.
Administered by HMRC
This whole process of charging and collecting levies will be handled by HMRC with the same framework of collections for NICs; PAYE and Income Tax Self Assessment.
Individuals from England, Scotland, Northern Ireland and Wales will have to pay levy contributions the same as national insurance.
During the tax year 2023-24, levy commitments should point out as a different section on payslips. Wherever it is possible in the payslip, a conventional message should be incorporated for the following tax year (2022-23). More data on payslip prerequisites will be accessible at the forthcoming time.
What do experts have to say about this decision?
Deputy Director at the IFS, Helen Miller, said: “Levying lower rates of tax on the incomes of the self-employed than of employees is unjustified, unreasonable and inefficient. Today’s NICs increase the gap and therefore move the tax system further in the wrong direction.”
Deputy Director at the IFS, Carl Emmerson also commented that “There is no good economic reason to start a third tax on income. The government could have simply achieved its aims without adding the complexities that come with having a third tax. In the short run, the extra revenues could be used on boosting health and social care spending. In the long run, hypothecation is an illusion.”
The rise would target young people, supermarket workers and nurses, instead of those with the “broadest shoulders” who should pay more, said Labour Party’s, Keir Starmer. This health and social care levy will help the sectors to recover from pandemic-struck money shortage.
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