Exclusive: Londoners absorb heaviest national insurance hike hit

Londoners have suffered the worst blow to their finances in the UK in the first month the national insurance hike has been in effect, reveals exclusive research shared with City PM today.

Workers in the capital have absorbed a near £300m blow to their budgets from higher national insurance bills, the biggest jump in the country, intensifying the worst squeeze in their living costs in three decades.

London employees paid an additional £110m in national insurance contributions last month, while employers forked out a further £174m to the Treasury, according to analysis by the Liberal Democrats.

The research comes as voters are bracing to head for the polls for Thursday’s local elections in England, Scotland, Wales and Northern Ireland.

On 6 April, employee and employer national insurance contributions rose 1.25 percentage points, a move that is forecast to contribute to swelling the UK tax burden to its highest level since the late 1940s, according to Britain’s official forecaster, the Office for Budget Responsibility (OBR).

However, the heavier national insurance burden will ease in July when the threshold at which taxpayers start paying the levy rises to £12,570, a move Chancellor Rishi Sunak announced at March’s spring statement.

Sunak also promised to cut the basic rate of income tax to 19p by 2024.

Higher tax bills are feeding a historic cost of living crunch that is expected to chill UK economic growth this year.

Inflation is running at its highest level since 1992, hitting seven per cent last month, but is expected to trend much higher and potentially peak at 10 per cent in October when the energy watchdog lifts the cap on bills again to account for higher wholesale oil and gas prices as a result of Russia’s invasion of Ukraine.

The Bank of England on Thursday is anticipated to hike interest rates for the fourth meeting in a row, taking them to one per cent, the highest level since 2009 and raising monthly mortgage payments for households on floating mortgages.

Growth is forecasted to come in much lower than the OBR and the International Monetary Fund were initially expecting at the beginning of the year due to an anticipated pull back in household spending in response to living standards eroding the quickest pace in 66 years in 2022.

London contributed a fifth of the UK’s entire national insurance tax rise bill, the Lib Dems said, driven by the capital having a greater concentration of higher paid workers.

The south east, which also houses a high proportion of Britain’s top paid workers, contributed the second highest amount at £230m.

“In just one month alone London and the South East have been hit by an eye-watering tax bill just as the cost of living crisis worsens,” Sarah Olney MP, business spokesperson for the Liberal Democrats, told City A.M.

“Families are seeing their payslips lose value just as energy bills and inflation skyrocket,” she added.