Rishi Sunak risks backlash as health and social care levy ‘will be increased’
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In September, the Government confirmed it will increase National Insurance by 1.25 percent from 12 percent to 13.5 percent. The hike represented an effective 10 percent tax increase which is known as the health and social care levy. The tax was introduced to grapple with the NHS backlog and fund social care reform. Under it, the average worker will pay an extra £255 a year in taxes. An employee on a £20,000 a year salary will pay an extra £130.
Higher earners on £50,000 per year would pay an extra £505.
People earning under £9,564 a year, or £797 a month, don’t have to pay National Insurance and won’t have to pay the new levy.
Critics claimed that the hike targeted those most severely impacted by the pandemic – younger taxpayers – rather than older people with more secure wealth.
However, CEO of Blick Rothenberg Nimesh Shah told Express.co.uk that this tax could be increased further in the future.
He made the claim while discussing how the freezing of various allowances will bring more people into the tax net.
Mr Shah said: “In the March Budget they estimated freezing the allowances (of the pension lifetime allowance, income and wealth taxes) was going to raise £21billion come 2026.
“It’s a very clever tactic from the Government because you don’t necessarily notice it happening. The inflationary aspect which you don’t necessarily pay much attention to is constantly eroding your wealth over that period of time.
“It was badged as a stealth tax back then and that’s exactly what it is. People need to be wise to this, they need to be wise to inflation, they need to be wise to the fact they are getting clobbered with more tax.
“People also have to bear in mind the 1.25 percent increase in National Insurance coming in next year, and if anything that could go up in the future.”
Mr Shah explains that, once the health and social care levy appears as a separate tax, it can be increased or decreased at any point.
He also warns that this tax isn’t going away.
He continued: “What they have badged as the health and social care levy, what they have done is next year they are going to add 1.25 percent to National Insurance.
“But the year after, it will just appear as a separate tax on your payslip – you’ll income tax, National Insurance and the health and social care levy.
“I think the reason it is a separate tax is so they can turn the taps on and off whenever they like in the future. It could apply to capital gains tax in the future.
“That is not a temporary tax, I don’t think it will ever be turned off, because you are never going to be that Government that turns off that tap which funds health and social care.”
Economist at the free-market Institute of Economic Affairs, Julian Jessop, told Express.co.uk in September that there is no guarantee the plan will actually work.
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He said: “It’s a tax increase for a start, you have to question whether you needed to raise taxes in the first place.
“But also, the money doesn’t look like it’s going to be well spent, so it doesn’t even look like it’s going to achieve the aim of improving health and social care.
“I think it’s a missed opportunity to have a fundamental rethink about social care and tax. Instead they have gone for a short term fix that actually may end up fixing nothing at all.
“There’s actually not going to be money for social care for several years, initially the money is going to be used to solve the backlog in the NHS.
“In the longer run, there’s no actual guarantee that this money will go to social care because, although they say it’s going to be ring-fenced, why would you necessarily believe a Government that’s just broken so many manifesto promises in a single day.”
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