The UK government recently announced a 1.25% increase in National Insurance payments to pay for social care reform. The increase will come into effect in 2022. But do Brits support the change? Well, recent data from YouGov suggests that almost half do not. Here is the lowdown.
Do Brits support the National Insurance increase?
Before the official announcement of the changes to National Insurance, YouGov conducted a study that showed Brits were split in their support for the proposed increase in National Insurance. At the time, 44% of Brits supported the proposal, while 43% opposed it.
Now, with the increase in National Insurance being confirmed, the number of people who opposed the move has risen. New findings show that almost half of Brits (48%) now oppose the move compared to 41% who support it.
Why do Brits oppose the increase in National Insurance?
It’s not entirely surprising that a large number of Brits do not support the hike in National Insurance.
A previous study by Barclays Wealth showed that a third of British adults feel unprepared for post-pandemic tax changes, with only 16% having planned ahead and feeling prepared for potential tax changes.
Most expressed concern about the impact these changes might have on their personal finances, including their savings, wealth building and retirement.
How can you lessen the impact of the National Insurance increase?
If you are worried about how the recent increase in National Insurance will affect your finances, including your savings, investments and retirement goals, here are three financial planning tips that could help soften the blow.
1. Boost your pension through salary sacrifice
Pensions provide a tax-efficient way to save for your future. As part of your company pension scheme, your employer might offer something called a salary sacrifice.
If you choose this option, you essentially agree to take a lower salary. Your employer then pays the difference into your pension alongside their usual contribution to the scheme. Since you are earning a lower salary, the amount of National Insurance you pay also reduces.
So, by participating in this scheme, you kill two birds with one stone. You reduce your National Insurance bill while at the same boosting your retirement nest egg so that you have more money for later life.
2. Boost your investment income
The increase in National Insurance means that you could be left with less overall disposable income. However, you can make up the difference by boosting your investment income, specifically by paying less tax on it.
This can be done by putting your investments in a stocks and shares ISA, which essentially works as a wrapper that shelters your investments from capital gains tax and dividends tax.
For the 2021 tax year, one person can save as much as £20,000 in this ISA, which demonstrates how valuable it can be.
3. Pay yourself in dividends where possible
If you own a small business and can choose how you get paid, it could be more tax-efficient to choose dividends over a salary. Dividend income is not subject to National Insurance contributions, and while it is taxed, the amount of tax you pay will be lower than it would on a normal salary.