This new levy, which will be in effect from April 2023, has ended the rule that pensioners don’t pay National Insurance (NI). It will initially be 1.25 percent on any income earned after the State Pension age. However, history has shown that taxes tend to rise over time.
John Cullinane was director of public policy at the prestigious Chartered Institute of Taxation. He first highlighted a risk that others had missed.
He suggested that they prepare for another National Insurance campaign on the pensioners in the wake of Boris Johnson’s tax increases.
Cullinane stated that the health and social care levies are NI in all but name.
“Although it won’t apply to all pensioners, the interesting thing about the levy is its application to certain income streams.
Cullinane said: “The Government will undoubtedly argue that the new levy in this case is exceptional, but it’s hard to not see it as setting a precedent which makes it easier for pensioner earnings to be included within the full coverage of National Insurance at some future date.”
He said that the tax will be easy to increase later to pay for Covid bailouts or balance the budgets.
The possibility of making pensioners pay more for adult social services costs may also help to reduce intergenerational unfairness.
Critics of the Government claim that taxing young people is necessary to safeguard older citizens’ property and prevent them from paying care fees.
Warning to pensioners
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Cullinane, one of the nation’s most respected experts on the subject, is right. This could have frightening implications for those pensioners who work after retirement in order to supplement their income.
They could be subject to a 12 percent tax penalty if they come within the full scope NI.
This is in addition to income tax that retired persons pay when their income exceeds the threshold for personal allowance.
This would cause a major blow to pensioners as increasing numbers of people are being forced to work past the State Pension Age to earn additional income.
Stamp duty on property shows that taxes tend to rise over time. It was only 1% on properties valued above PS250,000 in 1991.
The stamp duty holiday expires at the end this month. It will start at double the rate, two percent, on properties worth half of the amount – PS125,000. The maximum rate is 12 percent.
Boris Johnson’s Government could risk provoking the wrath from pensioners by increasing NI to the exact same level. We will see.
Publiated at Tue 14 Sep 2021, 08:12:00 +0000