The IRS has been accused of using “sleight of hand” to disguise the true costs of Boris Johnson’s National Insurance raid on an online calculator.
An HMRC tax tool launched to help workers understand the impact of their changing national insurance contributions falsely makes it appear that the The government is lowering their bills instead of raising them, activists have said.
From Wednesday, the threshold at which most people start paying National Insurance on their income will rise from £9,880 to £12,570 a year – a change hailed by the Prime Minister as the biggest tax cut of the decade, despite cutting the rate from the tax earlier in 2022, meaning the vast majority of workers will still pay extra.
The government’s calculator says a £50,000 worker in the year to July 5 will pay £4,958 to National Insurance, down from £4,968 in 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, in fact, almost all workers will be worse off from the overall effect of the changes. .
Critics said a fairer comparison would be between the current tax year and the previous one so that employees can see the combined effect of both the rate and threshold changes.
In the year from April 2022, a £50,000 employee will pay £5,049 to National Insurance. In the past 12 months they are said to have paid £4,852. This comparison shows that instead of lowering their tax bill, the combined effect of the changes cost them £197.
The figures are also flattered at other salary levels. Someone making £70,000 would think their national insurance bill had increased by £178 based on the HMRC calculator, according to analysis by tax accounting firm Blick Rothenberg. A comparison of the tax year would show they are £447 worse off.
Those with £30,000 are told by the calculator that they will save £197. However, they will be just £53 better off over the course of the tax year.