When will National Insurance go up and how much by?

In a time of unprecedented price increases, you may be wondering when will National Insurance go up and how it will it affect your family’s finances.

The Government is putting up National Insurance in order to raise an additional £12 billion for health and social care next year. It hopes to raise a total of £36 billion over the next three years. The increase will be in place for the 2022/23 tax year. At the start of the next tax year in April 2023, National Insurance will go back down, and a new Health and Social Care Levy will be introduced instead.

The National Insurance increase was first announced by the Prime Minister in September 2020.  Chancellor Rishi Sunak supported the announcement, saying: “To fund this big increase in permanent NHS spending and social care, we’re making the tough but responsible choice to increase taxes.”

When will National Insurance go up?

National Insurance payments are set to rise from 6 April 2022, which is the start of the new tax year. It’s a controversial decision and one that’s been heavily criticised. This is because the news comes at a time when households are feeling the financial squeeze after the energy price cap increase and rising prices for things like fuel and food.

The April increase will apply to employers, employees, and the self-employed who surpass the minimum threshold. The threshold for those who are employed is currently £184 per week, so if you earn less than that you won’t be affected by the increase. The threshold for the increase for the self-employed is profits of £6,515 or more.

Under current rules, if you’re of state pension age, even if you work, you’re not liable to pay National Insurance. But from April 2023, those over state pension age who are still working and earn or have profits over a certain threshold will have to pay the new Health and Social Care Levy.

A UK-wide 1.25% Health and Social Care Levy will be introduced from April 2022, paid by individuals and businesses.

This means:
• Additional £12bn on average annually for health and social care
• Those earning more pay more and businesses contributehttps://t.co/lwIS8h6H5R pic.twitter.com/u5CXoos7Xw

— HM Treasury (@hmtreasury) September 7, 2021


How much will National Insurance go up in 2022?

National Insurance will go up by 1.25 percentage points from April 2022. As National Insurance contributions are calculated as a percentage of what you earn, any increases are shown in percentage points rather than as a percentage. For example, if you increase something from 20% to 35%, that’s a 15 percentage point increase. But if you calculated the percentage increase from 20 to 35, you would get a 75% increase.

The 1.25 percentage point increase, is very different from the 1.25% rate that has been widely reported, including by the Treasury itself. This has understandably created confusion.

Sarah Pennells, consumer finance specialist with life and pension provider Royal London explains the numbers. “From April, National Insurance is going up by 1.25 percentage points for employers, employees and those who are self-employed. So the standard rate for people who are employed will rise from 12% to 13.25%, while the upper rate, will rise from 2% to 3.25%. For people who are self-employed, it will go up from 9% to 10.25%, and from 2% to 3.25%.

“The lower threshold is also rising in April, so you won’t pay National Insurance rate if you earn less than £190 a week. This means that people who are on the lowest earnings won’t be affected by the rise. But most people will pay more, and a rise from 12% to 13.25% is actually an increase of more than 10% overall – so it’s not a small increase.”

What could this mean for me?

In hard cash terms, this means someone earning an annual salary of £20,000 will pay an estimated £89 more in National Insurance from April, per month. Someone on a salary of £50,000 will pay around £464 more. And, those on higher incomes could find they’re paying over 15% more.

For the average worker on a salary of around £30,000 a year, they’re going to be paying an extra £255 in NI, which is 10% more than they would have been paying under the old rate.

Then as you move up the scale those percentages get bigger, somebody on £80,000, for example, is going to be paying £880 extra –  that’s a 16% increase.

You can check how much National Insurance you currently pay, as well as how much you can expect to pay in the next tax year,(2022-2023), using the Which? National Insurance calculator.

Why is National Insurance going up?

National Insurance is going up to fund the Government’s plans for more investment in the NHS. The investment will be aimed at easing the backlog caused by the pandemic. It will also go towards plugging the gap in funding for social care as the Government introduces a price cap of £86,000 on the amount people pay in care costs during their lifetime.

While the bulk of the money raised during the next tax year, is expected to go towards health and social care in England, according to a BBC report, there’s also expected to be an additional £2.2bn for services in Scotland, Wales, and Northern Ireland.

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