The taxman has been accused of using “sleight of hand” to hide the true cost of Boris Johnson’s attack on National Insurance in an online calculator.
An HMRC tax tool launched to help workers understand the impact of their changing National Insurance contributions is falsely making it look like the government is reducing their bills rather than increasing them, campaigners have said.
From Wednesday, the threshold at which most people start paying National Insurance on their income rises from £9,880 to £12,570 a year – a change hailed as the biggest tax cut of a decade by the Prime Minister, despite the fact that it increased the tax rate earlier in 2022, meaning the majority of workers still pay extra.
The Government’s calculator says a worker on £50,000 will pay £4,958 National Insurance in the year to July 5, down from £4,968 on the previous 12 months, a saving of £10.
However, this obscures the fact that Mr Johnson increased the National Insurance rate by 1.25 percentage points in April at the start of this tax year – meaning that virtually all workers will actually be left worse off than the overall effect of the changes.
Critics said a fairer comparison would be between the current tax year and the previous one so workers could see the combined effect of the rate and threshold changes.
In the year from April 2022, a worker on £50,000 will pay £5,049 in National Insurance. In the previous 12 months they would have paid £4,852. This comparison shows that instead of reducing their tax bill, the combined effect of the changes cost them £197.
The numbers are flattering at other salary levels as well. Someone earning £70,000 would think their National Insurance bill had risen by £178 based on HMRC’s calculator, according to analysis by tax accountancy firm Blick Rothenberg. A tax year comparison will show they are £447 worse off.
For those on £30,000, the calculator says they will save £197. However, they will only be £53 better over the course of the tax year.
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