Increasing national insurance is a significant change in our tax system, but what will it mean for you?
There are some changes to consider.
First, the national insurance interest rate will increase by 1.25 percentage points from April 6.
This means that everything you earn without tax threshold was taxed at 12%, now it will be taxed at 13.25%.
It may seem small in percentage terms, but in reality it is a significant tax increase.
Take, for example, someone who earns 000 27,000 a year.
That person used to pay around 5 2,053 a year in national insurance, but it will now rise by more than: 200.
Across the economy, this is a 11 11 billion tax increase for the government.
However, the crisis in the cost of living is getting worse, inflation is at its highest level in 30 years, and the price of energy has risen by 54% in early April.
Chancellor Rishi Sunak was under enormous pressure to ease the burden on people.
Thus, in his spring announcement, he made another adjustment by raising the national insurance threshold, the amount we can earn before taxes.
As of April 2022, the threshold is 9,880 pounds (an increase of about 300 pounds compared to March).
But it is much more than July – 12570 pounds.
According to the chancellor, this amounts to an annual tax reduction of about 330 pounds for employees.
But what does this mean? How do these two things balance against each other?
From April to July, when only the rate increase will take effect, but the threshold remains where it is, the condition of all employees will be worse.
While the highest paid earners will pay the most, it will be felt throughout the economy.
But everything will change in July.
In fact, the impact of a higher threshold would actually exempt some two million low-income earners from direct tax altogether.
Anyone earning less than 32 32,000 a year would be better off switching to another one.
The goal of raising the national insurance tax was to help finance health and social care bills by giving more money to the narrow NHS.
So do the threshold changes mean the NHS will get less than expected? Well, no.
The reason is the inflation of salaries.
In other words, as salaries rise, the treasury is, in fact, projected to earn more from health and social care taxes than expected. This means that the decline due to raising the threshold is somewhat balanced.
It partly explains why the government decided not to change the NHS cash budget. However, it should be noted that the NSS is also affected by wage and energy inflation, so in real terms it will have less.
Finally, it should be noted that taking into account all the tax changes made this year, the tax burden is still very high.
While taxes are progressive when the richest pay proportionately more than their disposable income, only the poorest 10th household will pay less tax than before.
In the face of inflation and energy pressures, it will still be a difficult and expensive time for many.
Increase of national insurance. How will it work? What will it mean for you? |: Business news:
Source Increase of national insurance. How will it work? What will it mean for you? |: Business news: