National insurance: Millions of people ‘misled’ by Government over how much tax cut will save, experts say | EXCLUSIVE The Treasury’s calculator of savings does not include the first three months of the 1.25 per cent rise in national insurance

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    Millions of British taxpayers have been “misled” by the Government over how much they will save following the tax cut due on Wednesday, finance experts say.

    i analysis has found the Treasury’s online tax tool does not include the first three months of the 1.25 per cent rise in national insurance contributions (NIC) payments, which came into play in April, in its calculations.

    This “disingenuous” measurement gives the impression more people are making a saving than really are, Nimesh Shah, chief executive of tax advisory group Blick Rothenberg, claims.

    As of Wednesday, the threshold at which Britons will start contributing to national insurance payments will rise from £9,880 to £12,570. It comes after the national insurance price hike, announced by Boris Johnson last year, came into effect in April.

    Last week, the Government launched its online calculator, claiming it provides personalised estimates for how much workers might be better off by in the year ahead.

    But analysis by i, outlined in the table below, shows every earner will end up paying more during the tax year than the Treasury’s official calculator shows.

    The tax year – April to March – is the period normally used by the Treasury to calculate its figures, including annual incomes. In this case, it has chosen to base its NIC savings calculator on the 12 months from 6 July.

    This measure ignores the entire rise in NI payments during the tax year on which Her Majesty’s Revenue and Customs assesses the annual income of taxpayers.

    While the Government website does state the savings claimed are not “an accurate calculation of your actual liability”, the Treasury told i it had chosen to use its annual period and not the tax year as a measurement because it wanted to make its “online tool as easy to understand as possible”.

    How Government’s claimed NI savings compare to full tax year payments

    Govt NI Calculator 2022/23 Tax Year

    £20,000 -£291 -£267

    £24,600 -£248 -£210 (Average UK salary)

    £30,000 -£197 -£142

    £40,000 -£103 -£17

    £41,389 -£90 -£0

    £50,271 -£7 +£111 (40% tax band)

    £50,982 -£1 +£120

    £60,000 +£84 +£233

    £70,000 +£178 +£358

    £80,000 +£272 +£483

    £90,000 +£365 +£608

    £100,000 +£459 +£733

    £150,001 +£928 +£1,358 (45% tax band)

    Sources: UK Government/Blick Rothenberg

    Mr Shah said: “The Government measures everything in terms of income and spending on the basis of a financial year from April to March. With its NIC savings calculator it has decided to ignore that on this occasion, which makes the savings look greater than they are during the tax year.

    “It is disingenuous and misleading for the Government to claim the savings it is, especially at a time when people are thinking about their finances more than ever. People want to know what their true financial is after tax and national insurance, and the Treasury’s calculator is not giving them that.”

    Boris Johnson has boasted that raising the NIC payment threshold would equate to “the single biggest tax cut in a decade”, saving 30 million British workers up to £330 a year.

    i analysis shows that during the tax year more than 7.5 million people will pay more in national insurance than they did during the previous tax year.

    Under the Government’s calculations no one earning up to £50,982 will pay a penny in additional NIC, but analysis by i and Blick Rothenberg shows that during the current tax year anyone earning £50,982 will pay an additional £120 in NIC.

    The analysis also shows that anyone earning above £41,389 will be worse-off, meaning around three million more people than the Treasury claims will not make any NIC savings during the tax year.

    Those earning up to £41,389 will also not make the level of NIC savings during the current tax year that the Government’s online calculator claims.

    At this level of salary, the Treasury claims earners will make a £90 saving from the 12 months to 5 July 2023, but over the course of the current tax year the NIC payment remains the same as the previous tax year.

    The Government also claims someone who has entered the 40 per cent income tax threshold with a salary of £50,271 will make a £7 saving, but during the current tax year they would have actually pay an additional £111 in national insurance.

    A Treasury spokesman said that the rise in the NIC threshold would result in an “historic £6bn tax cut” for earners but refused to state over which annual period this saving was based or over how many years.

    The Treasury added: “We’ve been transparent and honest… the results page prominently and clearly states that the period covered is from July 2022 to July 2023.”

  4. National Insurance is a tax in everything but name and should be included in the income tax. Its existence is dishonest.

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