Middle-income earners face NI hit

Details of annual upratings to National Insurance thresholds for 2008/09 were released by the Treasury almost two weeks after Chancellor Alistair Darling's Pre-Budget Report in what the Conservatives claimed was a "tax con".

The figures show that while the lower threshold below which no NI contributions are payable is being increased by just 5% from £5,200 to £5,460, the upper threshold for the main NI rate is going up by 15% - or £5,200 - from £34,840 to £40,040.

National Insurance is paid at 11% on income between the lower and upper thresholds, and at 1% on earnings above the upper threshold. The changes mean that someone earning £40,040 or more will pay £3,803.80 a year in National Insurance next year, compared to £3,260.40 this year - an increase of £543.40. Those earning below £35,100 will pay marginally less than this year.

Phillip Hammond, the shadow chief secretary to the Treasury, told the Daily Telegraph: "Gordon Brown's sleight of hand means that hundreds of thousands of middle-income earners, including many working in public services, will find they are paying more.

"Taken as a package with changes to the state second pension announced in this month's Pre-Budget Report, middle-income families will be paying more and getting less. When you look at the small print, this Budget was a tax con, not a tax cut."

A Revenue and Customs spokesman said that any increases due to changes in the NI thresholds would be offset by tax changes including the reduction in the basic rate of income tax from 22p to 20p announced in the Budget in March.

The spokesman said: "It is misleading to isolate national insurance changes in this way. Changes to the national insurance upper earnings limit are offset by other parts of a package of tax reform announced in Budget 2007 - the reduction in the basic rate of income tax to 20p, and the up-rating of the income tax higher-rate threshold.

"This ensures that people paying higher-rate tax under the new thresholds will be no worse off overall."

The Revenue said that the Pre-Budget Review came too early for details of the indexation rates to be included in Mr Darling's statement last week.