How the UK’s squeezed workers may face rising National Insurance payouts


With warnings from the Bank of England that soaring inflation is on its way during 2017, many households are already fearful about how they will manage their budgets with the next few months.
However, it would appear that the squeezed middle, and even lower income families, could find the stranglehold on their finances increases even further.
Proposals to change the UK’s National Insurance system could mean that millions of British employees end up paying hundreds of pounds more from their wage packets each year, including those in low paid jobs.
The Office of Tax Simplification (OTS), which advises the Chancellor and the Treasury, is suggesting that the system changes so that HM Revenue & Customs calculates National Insurance payments annually instead of monthly.
The change is being proposed to mirror national insurance payouts with income tax and to make operating the system easier.
However, if the Government decides to take the recommendations on board and implement them, around 5.5 million workers who have annual earnings of more than £20,000 will pay around £242 from their annual wages.
People who receive an annual bonus as part of their salary package, or who are given a pay rise part of the way through the year will also find themselves paying more in National Insurance.
Chas Roy-Chowdhury, who is head of taxation at the Association of Chartered Certified Accountants said he expected the so-called squeezed middle to be hit the hardest.
He said: “Middle-class workers are going to be affected by these changes. The Government needs to be looking at the impact on them and must make sure they don’t lose out.”
While many households already have concerns about rising costs of goods, particularly food, as a result of expected inflation increases during 2017, the new rules would not come in for another six years.
They would see students, people who have recently graduated, and workers on temporary contracts paying less per year in National Insurance.
The OTS believes that the plans will result in some 5.5 million people paying more in National Insurance. However 7.6 million people would pay less, says the organisation.
OTS chair Angela Knight says the current system is overdue a shake up because it is now out of date.She said that “some will gain and others will lose out” under the new proposals.