The Budget may drag 8.7 million pensioners into paying National Insurance for the first time.
Pensioners paying NI would reportedly raise £6billion a year (Image: Getty)
Pensioners may be dragged into paying National Insurance for the first time in the Chancellor’s November Budget. The Resolution Foundation think tank is pushing a new tax policy which would force 8.7 million pensioners to pay the levy for the first time, which is around two-thirds of British retirees.
The ideas are likely to get a positive hearing from the government, including Labour MP Torsten Bell, leading the Budget operations, who ran the think tank for a decade. A number of other former members at the foundation have also moved into leading political roles. Dan Tomlinson, a former economist at the think tank, has been appointed as Exchequer Secretary to the Treasury, and Baroness Minouche Shafik was brought in as Sir Keir Starmer’s chief economic adviser earlier this month. The Resolution Foundation believes their tax proposals could raise £6billion a year.
While Labour has promised to not raise income tax, NI or VAT, the Resolution Foundation found a way around this by suggesting cutting the headline NI rate from 8% to 6%. The cut would then be added to income tax, meaning that millions who don’t currently pay NI, primarily pensioners, suddenly would.
Any retiree affected by the move would see their income tax bill rise by 2p in the pound.
Adam Corlett, a principal economist at the Foundation, said: “These sensible reforms would raise revenue while doing the least possible harm to workers and the wider economy.”
He added: “By acting decisively, the Chancellor can turn her full attention back on to securing stronger economic growth.”
Mr Corlett warned the Treasury that the changes could also tackle long-standing “unfairness” in the tax system, helping to remove a bias against employees while raising more from wealthier individuals.
“These proposals would level the playing field, ensuring different forms of income are taxed more fairly,” he said.
A Treasury spokesperson said: “The Chancellor makes tax policy decisions at fiscal events. We do not comment on speculation around future changes to tax policy.”
