‘Growing pressure!’ National Insurance rise could be delayed as inflation soars

National Insurance rise is ‘daylight robbery’ says Sir John Redwood

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Last year, the Chancellor Rishi Sunak confirmed plans to hike National Insurance contributions by 1.25 percentage points on workers and employers to pay for the Government’s social care ambitions. However, since that announcement, households have been forced to prepare for the pending increase to energy bill payments and current rising inflation, which has seen expenses rise exponentially.

According to The Resolution Foundation, the average household in the UK is set to see its income fall by around £1,000 this year due to inflation.

In light of the Chancellor’s Spring Statement next week, experts are weighing in on whether a potential delay to the National Insurance rise could be on the cards.

Sean McCann, a financial planner at NFU Mutual, believes a delay on the tax rise would be welcomed by many households in light of the cost of living crisis.

He said: “Since Rishi Sunak announced the 1.25 percentage point hike in National Insurance last Autumn the cost of living crisis has started to bite with inflation beginning to impact most aspects of daily life.

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“There is now growing pressure on the Chancellor to delay an increase which will leave the vast majority of workers with less money in their pocket at a time of skyrocketing energy bills.

“Delaying the rise by at least 12 months would also be welcomed by business owners, who face the prospect of paying more National Insurance at a time of rising costs in other areas like fuel and materials.”

Even if a delay does not end up happening, the financial expert explained how taxpayers can save their hard-earned money from being taken by the National Insurance hike.

He added: “If the hike does go ahead, employees and businesses can reduce the impact by paying more into their pensions using salary sacrifice.”

This cost-saving measure allows people to save money in their retirement pots instead of having it being taxed.

However, some experts believe a delay is “very unlikely” due to how National Insurance is taxed on everyday Britons.

Shaun Moore, a financial planning expert at Quilter, outlined the controversy that has come about following Rishi Sunak’s National Insurance announcement last year.

Mr Moore explained: “By far the most controversial tax change announced by the Government last year was the 1.25 percentage point increase in National Insurance contributions, initially to pay for the NHS backlog before being used to fund social care.

“While 1.25 percentage points may seem small, someone on a £50,000 salary will pay £464 next tax year, or 10 percent more.

“Given the considerable increase in energy bills, the sky-high fuel prices and eyewatering inflation numbers, many have called for the national insurance rate hike to be delayed or scrapped all-together.”

Despite the outcry against the Government, Mr Moore is unsure whether the National Insurance rise will be postponed as such an action will benefit higher earners more.

The financial expert added: “But a U-turn from the government at the Spring Statement is very unlikely.

“This is because National Insurance is paid by everyone under state pension age, so scrapping the hike would be a saving to everyone regardless of income level.

“In fact, higher earners would benefit more from the hike being delayed, in pounds and pence terms.

“It therefore seems likely the Government would opt instead for a more targeted fiscal measure, that would have a greater impact on lower-earners and those more vulnerable to energy price hikes.”

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