Raising £20bn: Chancellor Rises National Insurance Contributions in Budget
In the upcoming Budget, Chancellor Rachel Reeves is set to raise up to £20bn by increasing employers’ national insurance contributions. The move will cover about half of the £40bn funding gap she is trying to fill. This significant modification will be a "raid on company profits" according to the Conservatives.
Meeting the Funding Gap
To meet the £40bn funding gap, the Chancellor has identified a range of tax rises and spending cuts. The key aim is to cover the costs of rebuilding the NHS and other public services. The funding gap is the result of the government’s desire to balance the budget and maintain a stable economy.
National Insurance Contribution Hike
To achieve this goal, the Chancellor will raise the employers’ rate of national insurance and lower the threshold at which employers start paying the tax. This change will generate around £17bn, according to HM Revenue & Customs’ "Ready Reckoner." The rate rise could be slightly less, depending on the specifics of the policy.
Cutting the Threshold for Employers
Currently, employers pay 13.8% national insurance on earnings above £175 a week. The government has announced plans to cut this threshold, which will have a greater impact on higher-earning workers.
Rebuilding the NHS
The increased revenue generated by the national insurance hike will be used to fund the rebuild of the National Health Service (NHS). This is a crucial step towards ensuring the long-term sustainability of the health service.
No Raising Employee National Insurance
Despite ruling out increasing national insurance rates paid by employees, the Chancellor had not exempted employers from this tax. The Labour manifesto did not specifically mention this change, which has sparked criticism from the opposition.
Opposition Reactions
The opposition has criticized the tax rise, labelling it a "tax on jobs." However, the government is trying to generate public support by presenting the hike as a necessary step towards restoring the health service.
Resocializing the NHS
The £40bn funding gap is the result of the government’s desire to balance the budget and maintain a stable economy. The planned tax rises and spending cuts will help achieve this goal.
FAQs
Q: What is the purpose of the national insurance hike?
A: The purpose of the national insurance hike is to generate additional revenue to fund the rebuild of the National Health Service (NHS).
Q: Who will be affected by the national insurance hike?
A: Employers will be affected by the national insurance hike, with those who employ higher-earning workers expected to be impacted the most.
Q: What is the current national insurance rate for employers?
A: The current rate for employers is 13.8% on earnings above £175 a week.
Q: Will the national insurance hike be applied to pension contributions?
A: No, the national insurance hike will not be applied to pension contributions, as the Chancellor has rejected this idea.
Q: What is the total funding gap?
A: The total funding gap is £40bn, which needs to be filled through a combination of tax rises and spending cuts.
Q: What is the goal of the "Corporate Tax Roadmap"?
A: The Corporate Tax Roadmap aims to provide "tax certainty" for businesses, outlining the government’s plans for corporation tax rates and changes to the tax system for the remainder of the parliamentary term.
Author: www.ft.com
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