Rishi Sunak leaves door open to future stealth tax raid as National Insurance pledge left out of Budget

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Harry Yorke
·2 min read
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Rishi Sunak
Rishi Sunak

Rishi Sunak has left the door open to another stealth tax raid after a Conservative manifesto commitment to raise the national insurance contributions (NICS) threshold to £12,500 was left out of the Budget.

On Wednesday the Chancellor confirmed that personal allowances on income tax, pensions, inheritance tax and capital gains tax would be frozen until 2026, netting the Treasury an additional £21bn as more people are dragged into higher tax rates over time.

However, in the Budget Red Book, he has also kept open the option to change a number of NICs thresholds at future budgets, handing the Exchequer the ability to raise billions of pounds in additional revenues if required.

In 2019, Boris Johnson told voters that his “ultimate ambition” was to raise the level at which people begin paying both national insurance and income tax to £12,500 - a move which would save taxpayers £500.

Last year’s budget also confirmed that the national insurance primary threshold - over which employees’ earnings are taxed at 12 per cent - would rise to £9,500.

It described this as “the first step in meeting the government’s ambition to increase these thresholds to £12,500.”

Mr Sunak confirmed yesterday that the threshold would increase again to £9,568 from April, along with the upper rate, which will increase to £50,270 and then stay frozen until 2026, in line the personal income allowance.

But the future level of the primary threshold has not been set, with the document stating only that it would with “all other NICs thresholds... be considered and set at future fiscal events”.

The 102-page Red Book does not appear to mention the Government’s ambition to raise the threshold to £12,500 once.

Approached for comment, a Treasury spokesman said raising the NICs threshold to £12,500 was still the Government’s “ultimate ambition”. However, they acknowledged that there was no timeline for doing this.

The omission suggests that Mr Sunak has kept open the possibility of temporarily freezing the lower NICs thresholds, should he need to boost tax receipts again in future.

This would see more people dragged into tax as wages rise, and is known as "fiscal drag."

Mr Sunak has already chosen to freeze other personal allowances due to the limited revenue raising options available to him because of the manifesto pledge not to increase income tax, VAT or NICs during this Parliament