Money expert Martin Lewis has warned workers they are set to lose £369 each on average following the National Insurance manifesto-buster announced by Labour.
Though Chancellor Rachel Reeves has argued that the party’s pledge not to raise National Insurance was only ever limited to employees not employers, Money Saving Expert founder Martin Lewis has analysed the changes and concluded that workers will still be on average £369 worse off due to the change announced in the Budget.
The government has announced a raft of changes to National Insurance for employers, the tax which firms pay to the government on the money it pays to staff, which is separate to the tax on your earnings you pay from your pay packet, though they are both a form of National Insurance.
Firstly, from April the threshold at which an employer pays National Insurance for staff has been cut from £9,100 to £5,100, meaning more employers will pay more tax on more staff.
Secondly, the rate has been increased by 1.2 percentage points from 13.8 to 15 percent.
Taken together, that’s an average of £615 more that firms will have to pay to employ someone, and Martin reckons that ‘60 percent’ of that will be paid by workers.
Martin explained on his ITV The Martin Lewis Money Show Live: “So £9,100 minus £4,000 is £5,100 so you’re paying out an extra £4,100.
“At the new rate of 15%, 15% of £4,100 is for every employee who it’s paid for, earning above £9,100, a firm will have to pay an extra £615 a year. It is a very big rise.”
Martin did stress that some changes had also been made to benefit smaller companies, such as reducing the amount firms will have to pay if their total National Insurance bill is under £10,500, but he added: “But let us be honest about this change. It is likely to have an indirect impact on some employees’ pockets.
“Firms have to make a choice – are they gonna reduce their profits? Are they gonna charge their customers more? Or are they going to reduce future employee benefits and salaries?
“And the Office for Budget Responsibility, the official body on this, said, well they’ll only be able to pass on about 60 percent of the cost to employees in the short term.
“So it’s saying around 60 percent of this will actually be a cost met by employees. Which is why it’s fair to say this is an indirect tax rise on the employees.”
