It seems that 2022 has so far been the year of increases. From the fuel in our cars to the energy in our homes and now the amount that comes out of our pay packet. In the Autumn of last year it was decided that National Insurance contributions will temporarily rise in April and go towards spending on the NHS, health and social care in the UK. We’ve only got to look at how much we have valued and appreciated the work that they have done during the Coronavirus pandemic to understand why this Government legislation has been brought in. But what does this mean for employees and the workforce as a whole?
What is National Insurance?
If you’re over 16 years old, earning over £184 a week or self-employed and making a profit of £6,515 or more a year, you’ll see in your payslip a deduction that goes towards National Insurance. In the long run it’s in your favour as it means you can qualify for certain benefits, maternity allowance, bereavement support and the State Pension. As mentioned it also goes towards the NHS.
How much is National Insurance rising by?
The increase of 1.25 percentage points which was implemented on the 6th April applies to three types of classes:
Paid by employees (Class 1). A rise from 12% to 13.25% if you earn between £184 to £967 a week, and rise from 2% to 3.25% if you earn over £967 a week.
Paid by those who are self-employed (Class 4)
Paid by employers (Secondary Class 1,1A and 1B). This will increase from 13.8% to 15.5%
You’ll be able to see what contributions you have paid towards National Insurance in your payslip along with how much tax you have paid that month too. There are a number of exemptions to bear in mind though. This includes if you’re a married woman or widow with a valid ‘certificate of election’. Or if you have got more than one job and have decided to differ your National Insurance.
What does this mean for you?
It’s something we’ve seen on the news, in the papers and your employer should have made you aware off. The National Insurance increases will be implemented in your April payslip. It is worth noting though that in the Spring Statement, Rishi Sunak announced that there will be an increase to the threshold in which National Insurance payments are taken. From July this will be the same amount as the income tax threshold (also known at the personal allowance). With the increasing cost of living this means that if you earn below £12,570 a year you won’t pay any National Insurance. Due to the higher threshold this is also advantageous for more employees as you’ll pay less national insurance overall. Therefore, an average of £330 will be saved per employee in a year. Although the rise in April may be tough to swallow, it will be short lived if you’re earning under £40,000.
To read more about Government Legislation, career trends and tips for employees and job seekers, check out our other blogs.
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