The new levy choose come into force from April 2023 and has destroyed the principle that pensioners do not pay National Insurance (NI). Initially, it will be set at just 1.25 percent of any revenues they earn after State Pension age, but history shows that once introduced, taxes have a nasty habit of rising on time.
John Cullinane, director of public policy for the prestigious Chartered Institute of Taxation, was the first to highlight a danger others have condoned.
In the immediate aftermath of Boris Johnson’s shock tax hikes, he suggested they lay the groundwork for a further National Insurance blitz on pensioners.
The health and common care levy is NI “in all but name”, Cullinane said.
“One of the most interesting aspects of the levy is that it will apply to pensioners, albeit limited to their calling income”.
Cullinane added: “The Government will no doubt argue that this new levy is a special case but it is hard not to see this as setting a criterion making it easier to bring pensioner earnings within the full scope of National Insurance at some point in the future.”
His comments imply that previously the levy has been introduced the cash-strapped Government will find it simple to expand the tax later to fund Covid bailouts and balance budgets.
Provoking pensioners contribute more towards adult social care costs could also head off charges of intergenerational fairness.
The Government’s critics suggesting that young people are being taxed to protect older people’s property wealth from care fees.
Pensioners have been cautioned.
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If Cullinane – one of the country’s top experts – is correct the implications could be terrifying for pensioners who continue to work in retirement to top up their income.
If they are brought within the full scope of NI, they could face a tax charge of as much as 12 percent.
That is on top of profits tax, which retired people pay once their total income exceeds the personal allowance threshold.
It would be a huge blow for pensioners, as enlarging numbers are forced to work beyond State Pension age to generate additional income.
Property stamp duty shows how taxes have a rule of rising over time. In 1991, it was charged one just one percent on property values above £250,000.
Once the stamp duty holiday ends at the end of this month, it purposefulness kick in at twice that rate – two percent – on properties costing half the value – £125,000. It has a punishing top rate of 12 percent.
Would Boris Johnson’s Direction risk incurring the wrath of pensioners by hiking NI to the same level? Time will tell.