What the social security hike means for you

The tax burden for workers and salaried employees increases starting today as a controversial increase in National Insurance Contributions (NICs) goes into effect.

Employees, companies and the self-employed pay an additional 1.25p in the pound. Instead of 12% on earnings up to £50,270, employees now pay 13.25%. Above that level they pay 3.25% instead of 2%.

The government rejected widespread calls to postpone or scrap the plan amid the cost-of-living crisis. Union leader Keir Starmer described it as “the wrong tax at the wrong time” when “people are struggling to pay their bills”. But Health Minister Sajid Javid said BBC breakfast the increase was “right and fair”.

government split

Backbench Tory MPs have long opposed raising Social Security contributions.

In January Robert Halfon, chairman of the Board of Education, called on the government to “go back to the drawing board”. Backbench MPs Robert Jenrick and Mel Stride also called for “a delay in the increase.” BBC called. Jenrick said it would have been 2022 “particularly hard” for families before the planned tax increase.

At a briefing with reporters in late January, a spokesman for No 10 said the Prime Minister and Chancellor were “fully committed to introducing the health and welfare levy in April”.

After speculation that he might abandon the tax hike and speculation that he was at odds with his chancellor, the two men confirmed there would be no reversal. “We must continue with the sickness and care levy,” they wrote in a Sunday times Article that appeared under their two names.

It was needed to clear NHS waiting lists and to solve long-term problems in social welfareSaid.

How it works

The tax changes start today with an increase in Social Security for employees and employers, before introducing a separate tax on earned income from 2023, which appears on an employee’s payslip as “Health and Social Security Contribution”.

The increase is part of the “biggest social welfare revolution in decades,” it said The Telegraph. The government is also introducing a new cap of £86,000 on social care costs over the lifetime and people with wealth between £20,000 and £100,000 will be eligible for means-tested social care funding for the first time.

Those with savings of less than £20,000 are eligible for fully funded care, while those with savings of between £20,000 and £100,000 can receive partial support.

Although the new welfare reforms will only apply to England, the tax changes will affect the whole of the UK. But the revenue from the levy will be shared among the four nations.

According to the Government, Scotland, Wales and Northern Ireland will receive an additional £1.1bn, £700m and £400m respectively by 2024-25.

“However, health and social care are decentralized and differ significantly, which means that issues such as the ceiling and floor for people’s personal expenditure on care will also vary,” The guard reported.

break down numbers

Paying a National Insurance Contribution is compulsory if you are aged 16 or over and are either an employed person making over £184 a week or are self-employed making a profit of £6,515 or more per year.

From April 2022:

  • the current rate of 12% on earnings between £9,564 and £50,268 will rise to 13.25%
  • the current rate of 2% on earnings over £50,268 will rise to 3.25%
  • Employers must also pay more, contributing 15.05% to National Insurance on workers’ earnings over £170 a week, down from 13.8% now.

“People earning less than £9,564 will not have to pay either Social Security or the new levy,” it said BBC reported. But unlike Social Security, the new levy “will also be paid by pensioners who work,” the broadcaster added.

Impact on earners

The increases mean that “millions of Britons will spend up to hundreds of extra pounds each year,” the said daily mirror.

According to analysis by financial services group Hargreaves Lansdown, the changes will impact take-home revenue as follows:

  • £10,000 salary: £52 paid now; £57 with 1.25% increase – 5€ extra per year
  • £20,000 salary: £1,252 paid now, £1,382 with 1.25% increase – £130 extra per year
  • £30,000 salary: £2,452 paid now; £2,707 at 1.25% increase – £255 extra per year
  • £40,000 salary: £3,652 paid now; £4,032 at 1.25% increase – £380 extra per year
  • £50,000 salary: £4,852 paid now; £5,357 at 1.25% increase – £505 extra per year

A major criticism of the increase in Social Security is that anything earned over £50,000 will be taxed at a rate of just 2% – so the increase will have proportionately less impact on the highest earners.

https://www.theweek.co.uk/news/uk-news/954054/what-the-national-insurance-rise-means-for-you What the social security hike means for you

Fry Electronics Team

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