Increasing NIC rates by 1% will cost £2 per week for someone earning £20,000 per year, or £17 per week for someone earning £100,000 per year. This is not insignificant and will make a real dent in average family incomes.
Middle earners with a salary of £50,000 will continue to pay the highest effective NIC rate at 9.7% (10.51% under the proposal) compared to only 5.88% (or 6.78% under the proposal) for someone earning £100,000.
The change would add an effective 0.52% tax to someone earning £20,000 per year, and 0.9% to someone earning £100,000 per year, due to the way the allowances work.
Both employed and self-employed individuals will be hit by the same amount, with self-employed individuals continuing to benefit from overall lower NIC rates, unless that is also changed.
No doubt the Government will try to ‘sell’ the idea of what could be seen as an age war by arguing that the additional NIC cost, for someone working from age 20 to 67 and earning £20,000 per year increasing by 3% annually, is £16,500 as a result of the increase, but this will save them thousands of pounds in care costs later in life.
Increasing NIC in this way will add around £6 billion to tax receipts per year from employees and self-employed individuals, which broadly doubles to £12.5 billion if employers are also asked to pay an additional 1% NIC, as seems likely.
Would you like to know more?
If you would like to discuss the above or how it may affect you, please get in touch with your usual Blick Rothenberg contact or Robert Pullen, using the details on this page.
For any press queries, please contact David Barzilay whose details are on this page.