Boris Johnson Announces Tax Rise on Shareholder Profits
Boris Johnson has announced a surprise tax hike that will hit shareholder profits as part of a raft of measures to raise the billions needed to fund social care and the NHS. Last week saw the prime minister deliver a Live Social Care Funding Statement in the House of Commons, during which he stressed the necessity of the tax increases to address major issues with the UK’s current social care system.
During his announcement, he told MPs that the additional levy on earned income would be 1.25%, which would come alongside an increase in dividend rates of “the same amount”.
“This will raise almost £36billion over the next three years, with money from the levy going directly to health and social care across the whole of our United Kingdom,” he told the Commons.
Earlier in the week, rumours were circulating of a potential tax hike for investors on the cards. The Minister and Chancellor Rishi Sunak had already come under fire regarding plans for a now-confirmed National Insurance increase, going against a red-line pledge made by the conservative party in the run up to the last election.
It has now been confirmed that even when a taxpayer has reached state pension age, they will still be liable for the same higher NI contribution.
Commenting on the tax hike, Pensions Director at Aegon, Steven Cameron, indicated that the move is unlikely to go down well with UK investors.
“The Government’s plans to increase employer and employee NI by 1.25 percent to pay for the state’s share will no doubt continue to prove controversial, with accusations of younger often lower paid workers paying a disproportionate share of the costs of care for today’s elderly, many of whom seem comparatively wealthy” he said.
“Choosing to collect the extra funding through NI rather than income tax may make sense for the NHS boost but for social care looks more like spin. But using NI as the collection mechanism ensures businesses also contribute,”
“Extending the additional care premium to those with earnings above state pension age removes what would otherwise have been a glaring generational inequity,”
“Furthermore, the surprise addition of 1.25 percent to dividend taxes will ensure those with investment income will also contribute even if they have no earned income.”
Key CEO Will Hale said that while the tax increase was undoubtedly a controversial decision, it could ultimately be for the greater good of the UK public as a whole.
“There is no simple answer to the social care debate but with 12.5 million over-65s in the UK, we need to tackle this issue sooner rather than later,” he said.
“While today’s announcement that we will see a 1.25 percent increase in national insurance contributions is unlikely to be popular, it will be less of a bitter pill to swallow if we see a real improvement in how people can expect to access and receive the care they need via the NHS and in later life,”
“The devil will be in the detail and even with these changes, it is important to remember that older people will still need to make a substantial contribution towards paying for their own care,”
“We know that choice is important and that three-quarters of over-55s would like to receive care and support in their own homes. Savings, pension income and housing equity all have a role to play in supporting people as they use their own assets and the available state support to meet their needs in later life.”