Viral tweet on Rishi Sunak’s tax claims got it wrong

By | October 26, 2021

Rishi Sunak appeared on the Andrew Marr Show on Sunday, and what he said about National Insurance increases as part of the Health and Social Care Levy has caused confusion on social media.

A tweet with over 10,000 retweets says: “On Andrew Marr this morning, billionaire Rishi Sunak said that someone with an income of £24,000 pays Income Tax of £180. I’m a tax accountant, someone on an income of £24,000 pays Income Tax of £2,286 (£24,000 – £12,570 x 20%). He is Chancellor, I am reeling in despair.”

A screenshot of this tweet has also been widely shared on Facebook.

This is a misunderstanding of what the Chancellor said. He wasn’t talking about how much income tax someone on £24,000 currently pays in total. He was referring to how much more in National Insurance they will pay when the new changes to National Insurance come in, to fund health and social care.

Here is the full transcript of the exchange, which is about 51 minutes into the programme.

Andrew Marr: “The IFS said it is disappointing the government did not find a better package of tax measures to fund these spending increases. A simple increase in the income tax would have been preferable.”

Rishi Sunak: “Let’s take that as an example. Believe me, I wish I didn’t have to raise taxes, there is no easy or good way to do it, so you are choosing between degrees of unpalatable options. Income tax versus National Insurance, reasonable question to ask. 

“If you use income tax rather than National Insurance, there are a couple of big differences. The first is that income tax doesn’t involve businesses, therefore the rate that you would have to levy on people would be higher. So instead of 1.25%—

[they speak over each other].

Rishi Sunak: “The rate would have been over 2%. You’ve talked about the impact on families, so instead of a typical basic rate taxpayer earning £24,000 paying about £180, they would end up paying closer to £350. So the burden on them would be significantly higher if you were using income tax so we should bear that in mind.”

Although Mr Sunak does not use precise language in this comment, the Treasury confirmed to Reuters that he was referring to the projected National Insurance increase per year versus an income tax increase.

So the £180 the Chancellor refers to isn’t income tax, it’s the increase in National Insurance contributions an employee on £24,000 will make. In 2020/21, before the National Insurance rise comes in, this person would typically pay £1,731.84 a year in contributions.

In 2022/23, after the tax increases, they would pay £1,912.24, which is about £180 more.

We’re not sure how the Chancellor got the £350 figure. If the rate of income tax was increased from 20% to 22% for that bracket (an increase of two percentage points) that person would end up paying about £230 a month extra. An extra three percentage points would result in paying £343 extra. We have asked the Treasury what calculation he used to get the £350 and we will update this if they respond to that query.

Source