National Insurance hikes and social care costs have been hitting the headlines this week. As with any new government policy, this has sparked lively debate. Having had a few days to read up on the issues and gather my thoughts, I’ve decided it’s time to weigh in – specifically on the issue of wealth inequality.
I speak a lot about financial inequality and injustice on this blog, so it feels wrong not to comment at this time. This won’t just be a rant, though. I’ll look at what you can do to protect yourself and future generations.
This post will cover:
- What is the new health and social care levy?
- Why is this bad for wealth inequality?
- Why is this such a controversial topic?
- What can I do to mitigate the effects of tax increases?

What is the new health and social care levy?
The new health and social care levy will add 1.25 percentage points onto your National Insurance contributions from April 2022. This increase with also apply to share dividends – it might be worth considering an ISA…
From 2023, it will become a separate tax on income.
Prime Minister Boris Johnson said this will raise £36 billion for health and social care frontline services in the next three years and be the “biggest catch-up programme in the NHS’ history”.
How much extra tax you pay following the changes will depend on how much you earn and whether you receive any dividends from share income.
If you earn £20,000 annually, this tax year (April to April) you will pay £1,251 in National Insurance. Under the new levy, you will pay an extra £130.
Employees earning £30,000 a year will pay an extra £255 on top of the £2,451 they already pay.
Those paid £50,000 annually currently pay £4,851 a year in National Insurance. Under these proposals, their contributions will increase by £505 annually.
You pay National Insurance if you are over 16 and earn more than £184 a week. Self-employed people pay if they have profits of over £6,515 a year.

Why is this bad for wealth inequality?
This tax looks universal on paper. But sadly, the largest burden will be felt by young people – graduates in particular.
Number crunching by The Telegraph found a graduated earning £30,000 will give up 21.5% of their take-home pay to tax and student loans. That will have a significant impact on their disposable income.
These individuals will face a 42.35% marginal tax rate on any income above the student loan repayment threshold – just over £27,000.
Young people already hold a lower percentage of total wealth than their predecessors did at the same stage. It goes without saying that so many are struggling to get on the housing ladder too. Increasing the tax burden on younger generations will only exacerbate these problems.
Inequality isn’t just inter-generational either.
Young individuals from wealthier backgrounds will not be impacted in the same way. Perhaps their parents can pay their university tuition fees so they don’t have a student loan, or they can help with a house deposit, so they don’t have to worry about saving as much.
This essentially means that two people who went to the same university, did the same course, and got the same job after graduating, could be in two completely different financial situations – through no fault of their own.
In a way, this has always been the case. Wealth inequality is not a new problem, but it has increased hugely during the pandemic. Policies like these will only serve to perpetuate this problem.

Why is this such a controversial topic?
Increasing National Insurance contributions has proven to be divisive.
This could in part be due to the way National Insurance is perceived. Many see – which the government seem to want – as a pot you pay into. As a result, they feel they deserve their State pension and other benefits.
Therefore, older generations can get upset as they feel younger generations are trying to deny them a benefit they are owed.
I truly don’t think this is the case. Younger generations are acutely aware of the care crisis and State pension issues and believe these individuals deserve support. But they also want the same basic financial opportunities to be available to them in the way they were to previous generations.
Of course, previous generations didn’t have everything handed to them on a silver platter. They worked hard and saved up, often making big sacrifices to do so. But, they knew if they did this, buying a home was a realistic possibility. Many of them knew they had good pensions to allow them to retire comfortably.
At the same time, wealth inequality and social mobility are often controversial.
Many people don’t like to admit they’ve received help from their family or background. Perhaps, they want to project a “self-made” image, or maybe they’re embarrassed about the advantages they’ve had.
Others like to claim these advantages have had no impact on their current successes. Something that is nearly always untrue. You can work incredibly hard but still benefit from certain privileges. The two are not mutually exclusive.

What can I do to mitigate the effects of tax increases?
The vote has made it through Parliament and – short of a snap General Election – there is very little we as individuals can do to stop it.
While I believe it’s important to raise awareness about the issues mentioned above, we must also try to avoid becoming overly negative and despairing.
Instead, think about the ways you can either save or make the extra money you will be paying.
If you’re earning £20,000 a year, you need to save or make £130 to account for the difference. I’m aware for some people – with already stretched budgets – this will be really difficult.
But, there are plenty of money saving tips available, some of which you might not have tried yet. Just switching your energy provider could save you close to that sum!
For higher earners, saving over £500 more might be more difficult. But, it’s still possible. Take a look at your budget and see if there’s anywhere you could cut some expenses.
Making more money is slightly more complicated. The more you make, the more tax you pay. It’s not quite that simple with National Insurance, but for most people this will be the case.
This isn’t to say you shouldn’t push for a pay rise. There’s been significant wage inflation in many sectors, so it is worth asking your employer. Alternatively, have a look at other vacancies being advertised.
You could also start a side hustle. Having multiple income streams can offer extra financial security, so is a good idea anyway. If you’re not sure how you could start making extra money, have a look at these online job ideas.
Another option is to put your money into a pension. Salary sacrifice increases your preparedness for later life and stops you paying quite as much tax.
If you enjoyed this post, please like and share it across social media or with your friends! I’d also love to hear your thoughts and experiences. What do you think about the new health and social care levy? What are your thoughts on wealth inequality? Please do share them below.
Don’t forget to follow me on social media @Katie20Percent to keep up to date with all my latest posts.
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