“There can be no doubt that the social care crisis had to be addressed, as it is one of the areas of financial planning that worries people the most, especially as they are concerned that the wealth they have built up during their lifetimes will be eroded, with little to no legacy left to their family,” he said.
“Given that the UK has an ageing population, this crisis is only likely to get worse in the future, and something had to be done. Whether yesterday’s announcement, of a 1.25 percent rise in National Insurance and Dividend taxes, will be sufficient to solve this problem remains to be seen, and future tax rises surely can’t be ruled out.
“The breaking of their manifesto pledge not to raise taxes has now been broken, and the fear must now be that further tax rises could follow. Rumours of changes to Capital Gains Tax, Inheritance Tax and pension legislation have already been circulating for a number of months now. However, following yesterday’s announcement, I fear that one logical conclusion of the rise in National Insurance will be subsequent changes to hinder ‘salary sacrifice’.”
Mr Smith went on to break down how salary sacrifice works: “A salary sacrifice arrangement is one where an employee gives up part of their income, in exchange for a benefit provided by their employer, with the main benefits being that the employee saves both Income tax and National Insurance, and the employer National Insurance, on the portion of the salary sacrificed.
READ MORE: ‘Death of retirement’ warning: Working past 65 to become a necessity
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