Hannah McKay | Reuters
From April, the Johnson government wants to introduce a new 1.25% levy on healthcare and social benefits on income earned in the UK. Shareholder dividend tax rates will increase by the same amount. It will start with an increase in the existing national insurance rate (a current income tax) and become a separate labor income tax in 2023.
The tax hike will raise nearly £ 36bn over the next three years, according to the government, with tax money going directly to UK health and welfare systems.
Plans must be approved by Parliament before they can be enshrined in law.
Speaking to House of Commons lawmakers on Tuesday, Johnson said it would be “wrong of me to say that we can pay for this pandemic without making the tough but responsible decisions about how we fund it.”
The Prime Minister said that because the new tax rate would be a permanent additional investment in health care and social services, it would be “irresponsible” to cover the costs by borrowing more.
“Some will ask why we don’t increase income tax or capital gains tax instead. Income tax is not paid by businesses, so the entire burden would fall on individuals, roughly doubling the amount the basic taxpayer might expect to pay. And total capital gains tax revenue is less than £ 9 billion this year, ”he told politicians.
“Instead, our new levy will share the cost between individuals and businesses, and everyone will contribute according to their means. Those who earn more will pay more. And because we are also raising dividend tax rates, we will be asking businesses to be better positioned as owners and investors to make a fair contribution. In fact, the richest 14% will pay about half of the income. “
By raising taxes by 1.25%, Johnson’s government aims to tackle crises in social care funding and National Health Service treatment waiting lists, the latter of which have soared amid mounting pressure on health services throughout the Covid-19 pandemic.
Under the UK national insurance scheme, workers and employers pay a tax that funds certain social protection programs such as state pensions, statutory sickness benefits and maternity benefits. People over the legal retirement age do not pay tax, effectively reducing their tax bill.
For workers earning between £ 797 and £ 4,189 per month, National Insurance payments represent 12% of their earnings. Additional income over £ 4,189 per month is taxed at 2%. These payments are in addition to income tax.
The English NHS will receive a cash injection of £ 5.4 billion over the next six months to bolster its response to the Covid-19 crisis, the government said on Monday. Of this funding, £ 1 billion will be used to reduce the treatment backlog created by the pandemic.
In August, an analysis by the Nuffield Trust found that nearly 1.2 million people in England had to wait more than six months to access essential NHS services like cardiology and brain surgery.
Social protection reforms
Currently, people in England have to pay for their own care if they have savings and assets over £ 23,250, meaning social care is rarely funded by the state.
People with savings and assets valued between £ 20,000 and £ 100,000 will become eligible for ‘some means-tested assistance’, a form of assistance currently available only to people with assets valued between 14,250. £ and £ 23,250.
A disruption in the country’s social protection system is long overdue, with people often forced to sell their homes to meet the costs of care.
In his first speech as Prime Minister in 2019, Johnson said his government would “solve the social services crisis once and for all”, promising to “give every senior the dignity and security they deserve”.
Ahead of the country’s last general election in 2019, Johnson pledged in the Tory manifesto not to raise the rate of income tax, VAT or national insurance.
House of Commons Leader Jacob Rees-Mogg wrote in his Sunday Express column over the weekend that Johnson’s turnaround on taxes could cost the Conservatives votes. Drawing on the famous quote from former US President George HW Bush: “Read my lips: no new taxes,” Rees-Mogg argued that “voters remembered those words after President Bush them. had forgotten ”.
Business Secretary Kwasi Kwarteng, Commerce Secretary Liz Truss and Justice Secretary Robert Buckland are also said to be concerned about the plans, as are many Tory lawmakers who are not members of Johnson’s cabinet, the Guardian reported.