National Insurance Increase

The Government has introduced a new Health & Social Care Levy to fund the NHS and the Social Care sector and initially pay for the backlog in the NHS

At first, this will show as an increase in NI Contributions from 6th April 2022.  In later years it will be shown as a separate levy distinct from NIC’s which will return to normal rates

Class 1 NIC (Employee) and class 4 (Self -Employed) will both increase by 1.25% so the employed and self-employed will be hit by the increase equally

The changes will affect working age employees, employers and the self-employed, as well as directors taking dividends as the dividend tax, will also increase by 1.25% to 8.75%

In 2022/23 a typical taxpayer will pay the following additional amounts, depending on the tax band…

  • Basic rate taxpayer (earning £24,100) – £180 extra
  • Higher rate taxpayer (earning £67,100) – £715 extra

The new rates are…

  • Earnings between £0 and £184 per week – Nil
  • Earnings between £184 and £967 – increase 12% to 13.25%
  • Earnings above £967 – increase 2% to 3.25%
  • Self-employed earnings between £9500 & £50000 – increase 9% to 10.25%

How will this affect the Average Employee…

Whilst the amounts involved are not huge, this is coming at a time when inflation is rising and fuel prices are going to be a real concern for people so every little extra that is taken in tax could well have a material impact on family finances.

Employers are being hit too (worse in fact) and are already reeling in many instances from other costs rises such as automatic enrolment for pensions and the national living wage as well as the normal inflation rises that the rest of us are suffering.

The Government say if not now, when should this be brought in but could this be the straw that breaks the camels back for many taxpayers.

Earnings Level£12,570 p/a£50,000 p/a£100,000 p/a
Earnings between Primary Threshold £9,564 & Upper Earnings Limit £50,270£3,006 £40,436£40,706
Earnings above Upper Earnings Limit £50,270£49,730
Rate of basic NICS12%13.25%12%13.25%12%13.25%
Liability above Primary Threshold£361£398£4,852£5,358£4,884£5,393
Rate of higher NICs2%3.25%
Liability above Upper Earnings Limit£995£1,616
Total employee NICs£361£398£4,852£5,358£5,879£7,009
Total Additional Employee Contributions£37£506£1,130
Employer contributions:

Earnings above Secondary Threshold £8,840

£3,730£41,160 £91,160
Rate of NICs13.8%15.05%13.8%15.05%13.8%15.05%
Employer’s liability£515£561£5,680£6,195£12,580£13,719
Total Additional Employer Contributions£46£515£1,139

How will this affect the Average Self-Employed Person…

 Earnings level £12,570 p.a.Basic Rate: £50,000 p.a.Higher Rate: £100,000 p.a.
Earnings between Lower Profit limit £9,568 & Upper Profit limit £50,270£3,002£40,432£40,702
Earnings above Upper Profit limit£49,730
NICs basic rate9%10.25%9%10.25%9%10.25%
NICs Liability above Lower Profits Limits (£9,568) @ 9% / 10.25%£270£308£3,638£4,144£3,663£4,172
NICs higher rate2%3.25%
NICs Liability above Upper Profits Limit (£50,270) @ 2% / 3.25%£995£1,616
Total NICs payable£270£308£3,638£4,144£4,658£5,788
Total Additional Self-Employed Contributions £38 £506 £1,130

Conclusion…

Joanne Guest

Author Bio: I'm an ACCA qualified Accountant providing Accountancy and Bookkeeping services in Witney and Carterton. I'm always happy for a chat to discuss your accountancy needs and to determine whether Tetbury is a good match for your business.