Tax rise

Sunak wins battle over national insurance increase

Rishi Sunak
Rishi Sunak: revenue targets

Chancellor Rishi Sunak has won the argument with Boris Johnson over raising taxes and both have now confirmed that National Insurance will increase from April as planned.

Business groups and some Tory MPs had called for the £12 billion increase to be scrapped to help companies and householders cope with the rising cost of living.

Some have pointed to official figures showing the Treasury would receive a £13 billion windfall from lower-than-expected borrowing, enabling the government to drop the tax rise.

Mr Johnson last week appeared to be “wobbling” and prepared to scrap the national insurance rise in an attempt to placate his backbenchers as he fights to save his job.

But his joint declaration with Mr Sunak that the tax rise is needed is seen as a sign of growing confidence that he will cling on to power.

Mr Sunak has been insisting on a tax rise to help shore up the public finances after the massive cost of supporting the economy during the pandemic. It is understood that plans have also been ditched to cut VAT on fuel.

Under the plans, employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance from April 2022 for a year. It will then be collected as a new Health and Social Care Levy.

Mr Johnson and Mr Sunak have argued that the increase is fair because higher earners will pay more. An employee on £20,000 a year will pay an extra £89 in tax. Someone on £50,000 will pay £464 more.

From April, those earning under £9,880 a year, or £823 a month, will not have to pay National Insurance and will not have to pay the new levy.

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