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Council tax may rise significantly next year because of National Insurance hike

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Every year local authorities decide whether to raise council tax, keep it the same or cut it - but higher National Insurance bills for staff means almost all councils may have to up the cost next April

Council tax bills may rise, squeezing yet more families (

Image: PA)

Almost every person could see their council tax bill rise next year due to the government raising National Insurance to pay for the country's growing social care bill.

The new levy was announced last week, and will see the National Insurance paid by businesses and individuals rise from 12% to 13.25% next April.

Councils with directly-employed staff get part of a £2billion pot from the government to help with this cost.

But MPs last night said the issue will really hit councils which outsource services like bin collections to private companies.

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These councils face huge bills for National Insurance contributions.

Tory MP Geoffrey Clifton-Brown told the Public Accounts Committee of MPs last night that councils could have to hike council tax to help.

Boris Johnson has been firm that the 1.25% increase is coming (

Image:

PA)

He said: "A waste collection company providing 100% of their service to the local authority — will they or will they not have all their NICs reimbursed?

"If they don't, the cost goes up for local authorities and it will then have to go on to council tax payers."

Every year local authorities decide whether to raise council tax, keep it the same or cut it. While they are restricted from raising council tax by more than 5% a year, this issue could force bills to rise in many areas.

The Treasury will not promise council contractors will get any government compensation.

Cat Little, director general for public spending at the Treasury, said that "all direct employees of the public sector will be compensated for".

Boris Johnson last week confirmed National Insurance will rise 1.25% for both employers and employees UK-wide in April 2022 to raise £12billion a year for both health and care.

That will cost £180 a year for a worker on £24,100 and £255 for a worker on £30,000.

From April 2023, the rise will be charged at the same rate but become a 'Health and Social Care Levy' that appears separately on Brits' payslips.

From this point it will also apply to workers who are above pension age - which National Insurance currently does not.

From October 2023, the money will be partly used to fund a new £86,000 cap on the amount people must pay for care over their lifetimes.

There will also be a new-style £20,000 floor, which saves people from paying for their care once assets fall below a certain level.

But just £5.4billion of £36billion raised in the first three years (2022/23-2024/25) will go on social care.

Of the £5.4billion, half of it will go towards new costs caused by the cap and floor - leaving a measly £2.5billion or so for workforce, training, councils and better integration with the NHS.

Much of the rest will go on clearing Covid backlogs in the NHS - with the amount for social care only ramping up after 2025.

What is National Insurance?

National Insurance is a tax on earnings, paid by both employed and self-employed workers.

You build up contributions during your working life and this then allows you to qualify for the state pension and also certain benefits.

You have to pay National Insurance if you're 16 or over and either an employee earning above £184 a week, or self-employed and making a profit of £6,515 or more a year.

Under the current rules, once you reach state pension age, you no longer need to keep paying National Insurance.

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