This November sees the welcome reduction in national insurance feed into paypackets for the first time, although the first whole-month effect will be in December. While a reversal of a rise earlier this year, the additional substantial raising of the threshold from £9,880 to £12,570 that national insurance is payable at, remains. This real cut in NI payments for both employees and employers supports jobs in difficult times.
Reporting of last week’s autumn statement gave the impression that everyone would be paying significantly more tax due to the freezing of the tax allowances for the next few years, as well as the reduction of the threshold at which the 45p tax rate becomes payable from £150,000pa to £125,140. The reality is that currently, only 16% of taxpayers earn over £50,271 where they pay 40% income tax on amounts earned over that, while just under 2% pay the additional rate of 45%. It is correct that more people will now be paying the 45% tax rate on amounts earned over £125,140pa, but how many people do you know who earn over that amount? The vast majority of us in Crawley will be unaffected by that and those who are, will be able to afford it.
In their autumn statement reporting, the BBC published a chart showing most basic rate taxpayers paying £298 a year more in tax and national insurance, with higher rate taxpayers paying £670 more. This chart failed to show that it was based on a 7.5% pay rise! That means any additional amounts paid in tax are solely from significant pay rises, which most people would welcome having. There was also little mention that anyone reaching the higher tax bracket through pay rises, that their national insurance drops from 12% to 2%, so the overall tax and NI take only goes from 32% to 42% for anything earned over £50,140pa, rather than doubling as implied.
With the national minimum wage being raised from £9.50 to £10.42 an hour and pensions and benefits being raised by 10.1%, the autumn statement was fair and supports people in tough financial times.
Councillor Duncan Crow, Leader of Crawley Borough Council Conservative Group
23rd November 2022
