National Insurance hike: Expert discusses effect on businesses
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Taxpayers will see their National Insurance contributions rise by 1.25 percentage points in their next payslip. This means the tax will hit 13.25 percent for people earning between £184 and £967 a week from April 6, 2022. Households across the nation will be feeling the National Insurance rise as inflation and energy bills continue to skyrocket throughout the rest of the year.
However, last month the Chancellor Rishi Sunak announced the “largest personal tax cut in a decade” through the National Insurance threshold.
The amount at which people are liable to pay the tax is set to go up by £3,000 to £12,750 from July this year.
The reasoning behind Mr Sunak’s decision to raise the threshold was to lighten the blow on low income households after the initial National Insurance hike.
However, taxpayers will still have to wait three months before this welcome relief is implemented.
Speaking exclusively to Express.co.uk, Connor Campbell from Nerdwallet shared why he believes the Government have “missed the support” by raising the threshold at this date.
Mr Campbell said: “In isolation, the changes to National Insurance may have been manageable. But the hike isn’t happening in a vacuum.
“Soaring inflation and ballooning energy costs means it is going to hit harder than first thought, and even those who will benefit from the increased tax threshold in July may still need to tighten their belts for a couple of months.
“The Government may have missed the boat when it comes to helping all of the UK’s consumers in regard to National Insurance.
“But there is still time for them to provide additional support for the millions of people – and businesses – struggling with their energy bills.”
The financial expert explained how savers can do their best to avoid losing money to the National Insurance rise before the threshold is increased also.
He added: “To try and mitigate the impact of the National Insurance hike, it is best to work out exactly how much more a month it is set to cost you, and what your situation will be when the new threshold is implemented in July.
“From there you can calculate what changes you can make to your budget to compensate for the difference.
“Whether that be a number of small savings across a number of different areas – a bit less on shopping here, a few fewer treats there – or by cutting one major expense, such as a streaming service.
“It can be hard to trim the spending fat when there is little meat left on the bone.”
He suggested people may need to take a close look at every part of their budget, and see where they can compromise on existing outgoings.
Referring to Mr Sunak’s Spring Statement last month, Mr Campbell encouraged savers to “get to grips” with their finances so they do not experience any adverse side effects.
Mr Campbell explained: “There was no last-minute reprieve in the Spring Statement for the National Insurance increase, which will still come into effect in April.
“As a result, it remains important that households understand the impact that this will have on their pay packets and factor this into their budgets when planning their finances.
“The decision to lower the National Insurance threshold will benefit 70 percent of employees but this will not come into effect until July so there could still be some difficult months ahead for household finances.
“Ultimately the impact of this change will depend on your income so it is worth getting to grips with how you will be affected as soon as possible”.
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