"Let’s not forget that this is somewhat diminished by an increase in both personal and employer national insurance, as well as the impending hike in corporation tax."
Sunak said the National Insurance changes will offer a £6bn tax cut for 13 million people, amounting to an average cut of £330 a year.
Sunak described the NI threshold increase as "the single biggest tax cut for a decade". However, Torsten Bell, head of the Resolution Foundation thinktank, said: "This is a tax cut for the middle and top of the income distribution - only £1 in £3 of the benefit goes to the bottom half."
Nathan Wallis, chief of staff at Wesleyan Group, said: “The Chancellor’s announcements today go some way to addressing the very real challenges being faced in households across the UK but are unlikely to go far enough. Some of our customers are lying awake at night, worried about the impacts of the cost-of-living crisis and today’s announcement may ease the burden but won’t make it go away."
Steven Cameron, pensions director at Aegon, commented: “The Chancellor’s decision to increase the lower threshold of earnings on which employees pay National Insurance by £3,000 to £12,570 will be welcomed by many as helping mitigate the cost of living squeeze. There had been calls for the Government to defer the increase of 1.25% in NI, but Rishi clearly was not prepared to do so and instead has opted to make a major increase in the NI threshold. This will reduce the impact of the 1.25% increase for all, and will take anyone earning under £12,570 out of paying any NI contributions.
“However, increasing the threshold has longer term ramifications. Setting aside the 1.25% increase, which will be ringfenced to pay for social care and NHS support, raising the threshold will reduce the amount being collected in NI from today’s workers to pay for today’s state pensions. This will happen not just in the coming year but also in all future years, storing up longer term challenges for the funding of state pensions which are paid for out of NI on a pay as you go basis.
“There have been calls for the planned increase in state pension age to 67 by 2028 to be deferred, but having lower NI receipts will make that less affordable. Similarly, lower NI receipts could once again call into question the ongoing affordability of maintaining the state pension triple lock beyond this Parliament. Based on current predictions state pensioners could receive a bumper 8% plus increase in April 2023, which will take into account September's projected inflation figure.
”Furthermore, at present, those above state pension age don’t pay NI on earned income so will not benefit from the threshold increase.”
Managing director of Barrows and Forrester, James Forrester, added: “Such a bold move on income tax is of course welcome, but let’s not forget that this is somewhat diminished by an increase in both personal and employer national insurance, as well as the impending hike in corporation tax.
This will cause further problems for homeowners across the nation who will have seen a sharp increase in the cost of running their home already this year, with both an increase in interest rates, rising energy costs and a jump in fuel prices all bringing additional financial strain.
So while there’s been no real property initiatives announced today other than 0% VAT on energy saving initiatives, other announcements such as the cut in fuel duty and the increase to the household support fund will, at least, help reduce this overall cost of living.
This should provide some small amount of breathing room for those that are particularly hard pressed at present, although it’s unlikely to solve the issue completely.”
Tim Bennett, head of education at Killik & Co, concluded: “A fixation on Rishi Sunak’s increase in the national insurance threshold may distract attention from the potential impact of his baked-in “stealth taxes”. For example if CPI inflation remains at, or climbs above, today’s 6.2% the value of the fixed allowances he has already frozen over the next four years will be reduced substantially. To paraphrase Adam Kay, “This is going to hurt.”
