Despite record inflation and soaring energy prices, the Government is pushing ahead with April’s National Insurance (‘NIC’) increase so that it can later cut income tax in a perceived tax giveaway in the run-up to the next general election.
The Government has strongly resisted recent calls to cancel or postpone the NIC increase at the Chancellor’s Spring Statement next week. However, the cost-of-living crisis is here now and working families are fearing the higher tax burden in a month’s time. Despite that the Government has reinforced its desire to push ahead with April’s 1.25% increase, under the backdrop of record inflation and soaring energy prices.
The Government should be seriously considering at least a deferral of the 1.25% NIC increase to help working families in the wake of the impending cost of living crisis.
An individual earning £30,000 will be £214 worse-off per annum from April; someone earning £50,000 will be over £500 worse-off. There is also the additional NIC burden for employers as businesses grapple with increasing operational costs.
Widespread reports earlier in the year suggested the Chancellor, Rishi Sunak’s plans to cut the basic rate of income tax by 2p in 2024/25 – this is likely to be announced at the next Autumn Budget as the Government makes it first moves towards the next general election.
This is a tactical move by Rishi Sunak and the Government to give something back in run-up to the next general election, which Boris Johnson took away, when he announced the Health and Social Care Levy last September. However, the reality now is quite stark, and the government should do what it can to limit the impact of higher living costs.
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