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Should Salaries Increase To Match The Rise In National Insurance?

• May 17, 2022

Since 6 April, National Insurance has increased by 1.25%. This means that instead of the 12% tax that was put onto salaries, the amount now sits at 13.25%.

However, despite this increase, salaries are not due to be following suit. This will mean that the working world will be punished for something that they have absolutely no control over.

This does not seem fair.

So why is National Insurance increasing?

This price hike all goes towards a new Health and Social Care Levy.

This may not sound like too big an increase but it can cost hundreds of pounds a year.

For example, if you were to earn £27,000 a year, you will be taxed an extra £200 a year.

This increase amounts to an £11bn tax increase for the government across the whole economy.

This increase comes at a time when the cost of living crisis in the UK is getting increasingly worse. Inflation currently sits at its highest level in 30 years (8.5% higher than a year ago), pairing awfully with the energy price cap rising at the start of April by 54%!

Unsurprisingly, people were not happy with this new increase in National Insurance and consequently pressure was put on Rishi Sunak to help the people of the UK.

As a result the National Insurance threshold has now been lifted (these numbers represent the amount of wage that goes untaxed and then anything earned on top of that will start to be taxed).

When the increase was put in place in April the threshold sat at £9,880 - this increased from March by £300.

From July the threshold will sit at £12,570 instead.

Increasing the threshold by this much will mean a tax cut of around £330 a year for workers based on these statistics alone (but not for everyone when you look at the National Insurance increase too.

Until July, however, everyone will be in a much worse boat, having to pay out more money than they previously had been.

This increase in threshold will actually mean that roughly two million people who are on a lower wage will not be taxed anything at all which is amazing news for these people especially if they

come from a lower earning family. All of their wage will actually be going to them, hopefully allowing them to live a little easier from month to month.

Overall, only those in the poorest 10% of households will actually pay less in tax as a result of these new changes. This means that 90% of the population will be paying more tax than they were before.

Those earning under £32,000 a year will reap the benefits of the new tax changes but those earning more will see less money every month.

This paired with general inflation and energy prices, it will be a hard time for many to keep up with their bills as well as tax.

Allegedly, however, the government is claiming that National Insurance will return to its old rate from April 2023.

This is hard to believe, however, when the government previously claimed in their 2019 election manifesto that the national insurance would not be raised under their ruling.

So… Bearing all of this in mind, should employers increase their worker’s salaries?

I think the clear answer here is yes.

Employers should take all of the increased taxes, bills and general rise in cost of living in mind when assessing their employees’ salaries.

This opinion is also mirrored with the opinions of TGP’s LinkedIn followers.

• 94% believe that employees should receive a pay rise.
• 6% believe that it is not the fault of companies and so they should not have to pay out more.

Some workplaces have increased wages for workers, factoring in the new conditions of the world but the majority are still yet to follow suit.

This should change and companies should put their employees first!