Pensioner National Insurance health and social care levy will more than DOUBLE to 3.15%

Boris Johnson defends National Insurance levy in Parliament

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Last month, Prime Minister Boris Johnson announced that pensioners will pay National Insurance for the first time ever, to fund rising health and social care costs. The 1.25 percent charge will also be imposed on 25 million workers, squeezing their incomes at an already difficult time. Now a new report says even that will be nowhere near enough to fund care costs and the levy must soar.

Respected think tank the Institute for Fiscal Studies issued a report this morning that will confirm many people’s suspicions that the NI levy will rise and rise.

As the Express warned last month, now that the principle of making pensioners pay NI has been established successive Chancellors would steadily increase it over time.

The IFS report has now confirmed the danger. It said: “If the new health and social care levy is to rise to meet future health and social care pressures, then we estimate that its rate could need to more than double from 1.25 percent to 3.15 percent.”

That would be a punishing increase.

The IFS said the move could happen “by the end of this decade”.

Long-term health and social care pressures are set to rise as the population ages, the report said.

The Government will find it increasingly difficult to find cuts elsewhere, and will have to hike taxes instead.

The IFS added: “Other revenue-raising options are of course available but, regardless of the specifics, demographic pressures point to a need for future tax rises, not tax cuts.”

The new health and social care levy on pensioners will come into force from April 2023 and has destroyed the principle that people do not pay National Insurance after reaching State Pension age.

Initially, it will be set at just 1.25 percent of any income they earn after State Pension age, but may soon rise.

Right after the original announcement on 7 September, John Cullinane, director of public policy for the Chartered Institute of Taxation, highlighted a danger with the new pensioner levy that everyone else had overlooked.

“The Government will no doubt argue that this new levy is a special case but it is hard not to see this as setting a precedent making it easier to bring pensioner earnings within the full scope of National Insurance at some point in the future.”

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Cullinane’s warning looks increasingly ominous after today’s report. If he is right, Chancellor Rishi Sunak will have to hike the levy again. That could see pensioners pay NI at the standard rate of 12 percent on ALL their income.

The levy could even be extended to all of their income from personal and workplace pensions, too.

Today’s IFS report will also make terrifying reading for 25 million workers who will pay the new levy from April 2022.

The 1.25 percent charge will cost someone on the average salary of £30,000 a year an extra £255, while higher earners on £50,000 will pay an extra £505 a year.

If it was increased to 3.15 percent, the £30,000 earner would pay £643 a year more than today, while the £50,000 earner would pay a thumping £1,273 more.

That 1.25 percent levy seemed punishing at the time, but judging by today’s report it is only the start of the tax attack.

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