Our latest blog post is to help you understand National Insurance and prepare for the upcoming increase in NI due to start in April 2022.
What is National Insurance (NI)?
National Insurance (NI) is a tax on earnings and self-employed profits. Everyone who is earning an income and reaches a certain payment threshold will become entitled to pay into the United Kingdom’s ‘National Insurance’ pot. The money within in this pot is used to fund state benefits, such as maternity leave, statutory sick pay and pensions.
Why has National Insurance increased?
The UK Government has announced plans to increase the NI rate by 1.25% from tax year April 2022/23. The increase is to increase funding for health and social care in the UK. The Government say that the increase will be to aid the health and social care sector after the impact of the Coronavirus pandemic.
How much more national insurance contributions will you have to pay?
In the current system most people pay 12% on earnings between £9,568 and £50,270, and 2% on any income above £50,270.
Here’s roughly how your National Insurance payments will be impacted by a rise of 1.25 percentage points:
- People earning £10,000 a year currently pay £52 – they will pay £5 more each year (£57) as a result of the rise
- Those on a £20,000 salary now paying £1,251 a year will pay £130 extra, a total of £1381
- People earning £30,000 a year now paying £2,452 will pay £255 extra, £2707 in total
- For those on a £40,000 salary currently paying £3,652, a rise of 1.25 percentage points means they’ll have to fork out £380 extra each year, bringing the total to £4032
- People who earn £50,000 a year now pay £4,852 – the tax hike means an increase to £5357, an annual increase of £505
How to pay
You pay National Insurance with your tax. Your employer will take it from your wages before you get paid. Your payslip will show your contributions.
If you have any questions regarding your NI contributions paid through the payroll then get in touch today.