A one percent rise in income tax could pay NHS budget increase, Blick Rothenberg says

19/06/2018 News Team

A one percent increase on income tax and national insurance could pay for the 3.4 percent increase to the NHS budget announced by the government, accounting, tax and advisory practice, Blick Rothenberg hs claimed.

Robert Pullen a director at the firm, said: “There was alarm recently when a report from the Institute for Fiscal Studies and Health Foundation said that the NHS would need an extra four percent a year - or £2,000 per UK household - for the next 15 years and that the only realistic way this could be paid for is by tax rises of three percent on VAT, income tax and National Insurance contributions.

“If a three percent tax increase is implemented, this would undoubtedly cause further issues within the government, but a more manageable increase of just one percent to income tax rates could give the additional funding required."

For an employed worker who is not at retirement age a three percent increase would mean “extra tax of £892 for someone on £25,000 (3.5 percent effective tax rate) up to £11,747 for someone on £200,000 (5.9 percent effective tax rate).”

It is potentially worse as the tax brackets increase, Mr Pullen said: “For the £25k earner, that equates to £17 per week or £74 per month and for the £200k earner £226 and £979 respectively.” 

He continued, “The NHS budget in 2016/17 was around £122 billion, and so a 3.4 percent funding increase, as proposed, would broadly be equivalent to an extra £4.2 billion per year.

“We calculated, using HMRC statistics, that if income tax rates were increased by 1 percent then in the tax year 2016/17 an extra £4.2 billion would have been generated." 

Mr Pullen concluded: “This would go some way to filling the hole in the finances without relying on the ‘Brexit dividend’ crystallising but if the dividend does come to fruition the one percent could be even less."

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