In January 2021 I wrote here that tax rises are inevitable.
And so it has come to pass. And so soon as well.
Not wanting a good crisis to go to waste, in April 2022 National Insurance will increase by 2.5% (with 1.25% from employees and 1.25% from employers) and dividend tax will also increase by 1.25%.
The £12billion this will raise is equivalent to increasing income tax by 2%, but the government chose not to do that as all governments hate increasing something as visible as income tax.
Much easier to use the mysterious and widely misunderstood NI instead.
And if you think income tax isn’t increasing, think again. By freezing the personal allowance and higher rate thresholds for four years, it is estimated that 1.3m people will become income taxpayers and 1m will become higher rate taxpayers.
And all this from a Conservative government. It’s difficult to foresee politically where lower taxes will come from, especially with the Labour Party arguing the tax should be raised from landlords instead. (Oh please, haven’t they been hit hard enough lately by George Osborne’s tax changes?)
In April 2023 the new NI levy will be separately identified on payslips. I do wonder if future governments will see fit to keep increasing this levy as it taps into our emotional attachment to the NHS?
So the question again is, what can you do?
The main message from my earlier blog still stands; keep maximising all the current tax advantages because you never know how much longer they will last.
The enormous costs of the pandemic can easily be used by the current and future governments to justify a range of tax changes that they see fit to impose.
One day a future government might dust off their reading on the Laffer Curve and decide to lower taxes and argue that the businesses, jobs, enterprise, and higher spending this encourages will actually result in more cash being received by HM Treasury?