Advisers are calling for a delay in the National Insurance contributions increase to offset the rising cost of living and fuel prices, ahead of the spring statement this week.
Last year, the government announced plans to place a 1.25 percentage point increase on National Insurance contributions alongside a 1.25 per cent dividend tax, in order to pay for a £86,000 cap on the cost of social care.
The plans were dubbed a 'health and social care levy', in light of the Conservative's election pledge to not hike NI.
However, ahead of the spring statement this week (March 23), advisers have said chancellor Rishi Sunak should look to delay the increase given the economic situation at the moment.
Tom Kean, director at Thameside Financial Planning had views on what should be done and listed some of the actions he felt Sunak should take.
He said: “Firstly delay the NI increase to offset the current squeeze on fuel. Stop freezing allowances; it’s demoralising to be taxed by stealth. Get rid of the lifetime allowance – it goes against all logic to have a cap on input and output.
“Ideally cap the input amount, but don’t tax people for doing the right thing by penalising good growth or high payments. It’s a tax on prudence.”
Kean argued that there should also be no tinkering with pensions limits and rules.
“If they are going to change anything, make it a simplification,” he added.
In addition, Laura Ripley, chartered financial planner at Handford Aitkenhead & Walker, said pressure was “mounting” because of the rising cost of living, particularly given that the impact of the war has probably not filtered through to real inflation yet.
“The increasing energy prices is another big factor making this a ‘cost of living crisis’ – the chancellor needs to address this,” she said. “There have already been announcements for the council tax rebate and some help with energy bills but he may go further if he judges this to be affordable bearing in mind all the stimulus through the pandemic.
“Delaying the NI increase is one that everyone is talking about although so far they seem to be sticking to the plan to implement this from April; maybe a reduction is possible or applying only to the high earners.”
However, Ripley said the issue with this is that the NHS desperately needs more funding and if it does not come from this levy, it will need to be provided for from somewhere else.
“As a result of inflation running at such high levels there is some pressure on the chancellor to look at those frozen tax allowances,” she added.
“These were set to be frozen for five years but that was before this level of inflation and now many more people will be getting caught out by these.
“The lifetime allowance is one and many more ‘normal’ working people are now facing a tax penalty as a result.”