National Insurance is due to rise from April 2022, so what does this mean for employers and employees?
National Insurance Contributions go towards state benefits, including pensions, statutory sick pay, maternity leave and unemployment benefits. NICs are paid by employers, employees and those who are self-employed.
Under the current system, the amount of National Insurance you pay is determined by how much you earn and will only stop when you reach state retirement age. You pay mandatory National Insurance if you are over 16, earning over £184 per week or are self-employed and making over £6515 a year.
As of April 2022, those who pay National Insurance will see their contributions rise by 1.25%, meaning employees will pay more NI on their salaries, employers will pay extra NI for their staff and the self-employed more on their profits.
Employers: At the moment, employers pay 13.8% which will rise to 15.05% in April 2022.
Employees: Employees pay what are known as Class 1 contributions. For those earning over £187 a week at a rate of 12% and then 2% extra on all other earnings more than £976 per week. These will see rises of 13.8% and 3.25%.
So how much more will I owe as an employee?
-Workers on a salary of £20,000 will pay an additional £130 a year
-Workers on a salary of £30,000 will pay an additional £255 a year
-Workers on a salary of £40,000 will pay an additional £380 a year
-Workers on a salary of £50,000 will pay an additional £505 a year
-Workers on a salary of £80,000 will pay an additional £880 a year
Why is National Insurance Rising?
The Government announced the National Insurance increase to help fund the NHS and a new health and social care levy. This would help fund the provision of care for those with additional needs and disabilities.
Under the Governments social care plan, from October 2023, those who do not have assets worth more than £20,000 will be given social care free of charge.
People with assets between £20,000 and £100,000 will contribute towards the costs of their care and those people with assets of more than £100,000 will pay for all the costs of their care. The cost of social care is to be capped at £86,000 over a person’s lifetime.
What are your thoughts regarding the rise in National Insurance?