Published On: Sat, Sep 18th, 2021

Pensioner National Insurance levy will rise. Charged on pension income | Personal Finance | Finance


When I wrote Pensioners to pay National Insurance! Shock tax move to fund social care on September 4, I feared I was exaggerating the threat. Especially since I hadn’t seen any other journalist pick up on the danger. I needn’t have worried. Three days later, Boris Johnson announced that pensioners really will pay NI, although he dressed this up as an additional levy to fund health and social care.

My concern now is that this is only the start. That 1.25 percent levy is likely to rise and rise over time, and extend far beyond its original remit.

Because that’s what taxes do.

The health and social care levy will become a temptation for every future Chancellor, in every Budget, year after year after year.

History shows this is what happens, whenever a new tax is introduced. It starts low to ease everybody into it, then the pain ratchets up.

It happened with insurance premium tax (IPT), which adds more than £200 a year to everyone’s car, home and travel insurance premiums.

IPT was introduced in 1994 at a modest 2.5 percent. Successive Chancellors have increased it six times since then, and today it stands at 12 percent, rising to a thumping 20 percent on travel insurance, electrical appliance insurance and some vehicle insurance.

It’s the same story with stamp duty, which was a flat one percent in 1991 but now peaks at a top rate of 12 percent.

Who’s to say the new National Insurance health and social care levy will not follow the same trajectory?

Not me.

I’m not the only one worried. The Chartered Institute of Taxation was the first to realise that the new levy is a radical new revenue raising opportunity.

READ MORE: £100,000 social care fees nightmare: ‘My nan sold home but feared m…

After that, the next logical step would see National Insurance extended to income generated from pensions and savings, if it exceeds the personal allowance after being added to the State Pension.

Politicians could sneak that through under the guise of intergenerational fairness.

That may be too big a step for Boris Johnson, who is coming under fire from his own side after his unpopular tax blitz.

Boris could easily come back to it in future and even if he doesn’t, it will remain a tempting target for future administrations, including Labour ones.

The principle that pensioners can be charged NI has been established. The only question now is how much they will pay.



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