Plans to make pensioners pay National Insurance for the first time has set a dangerous precedent and the levy could rise in future, a top tax expert has warned. It paves the way for Boris Johnson and Rishi Sunak to increase the NI charge on pensioner earnings to 12 percent.
The new levy will 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 income they earn after State Pension age, but history shows that once introduced, taxes have a nasty habit of rising over time.
John Cullinane, director of public policy for the prestigious Chartered Institute of Taxation, was the first to highlight a danger others have overlooked.
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 social 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 employment 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 precedent making it easier to bring pensioner earnings within the full scope of National Insurance at some point in the future.”
His comments imply that once 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.
Making pensioners contribute more towards adult social care costs could also head off charges of intergenerational fairness.
The Government’s critics saying that young people are being taxed to protect older people’s property wealth from care fees.
Pensioners have been warned.