How will the increase in National Insurance tax affect you?

The government plans to increase the national insurance contribution for employees, self-employed and employers in April 2022. They want to spend this extra money on health and social care.

But how much will it cost you?

Is this a real national insurance increase?

The government is actually introducing a new ‘health and social care’ tariff. For the tax year 2022-23, they are collecting it by adding it to the national insurance contribution that you have already paid.

This is why it has been widely denied that the government is breaking its election promise not to raise taxes. Technically, this is not a national insurance tax increase, but a completely new tax

Then in the tax year 2023-24, National Insurance will return to its current rate and new taxes will be collected as a separate entity. You will still pay the same amount, but it will have a new name

Basically, they have been using the National Insurance System since April to give them time to set up a new one for the new tax.

How much will NI increase my cost?

The new tariff is 1.25 percentage points above your current national insurance rate. Employers, employees and self-employed taxpayers are responsible for paying it.

Employees

If you are an employee, the more you earn, the higher your NI increase will cost you.

Some approximate examples of annual growth for different income levels:

• Employees at £ 20,000: £ 130 increase.
• £ 30,000 Earnings Employees: Extra £ 255.
• High Rate Taxpayer with আয় 50,000 Income: Extra £ 505

The government has asked employers to include this statement in your pay-slip: “1.25% improvement in NICs, funding NHS, health and social care.” Like the current income tax and National Insurance, your employer will pay the extra money directly to HMRC from your earnings.

People over the state pension age

In 2022-23, if you are of state pension age, you will not pay an additional 1.25% because you do not pay national insurance. But from 2023, you will pay the new 1.25% health and social care duty. This is the same for all people of state pension age, unless you exceed the lower profit threshold through self-employed earnings.

Self-reliant

If you only pay Class 2 NICS, the NI increase and subsequent new charges will not apply to you.

If you have a profit that exceeds the lower profit margin for a Class 4 national insurance contribution, you will increase the NI from April and pay health and social care duties from the next tax year. You pay both through your self-assessment tax return.

Employers

As an employer, you need to increase the NI in 6 to Class 1, Class 1A and Class 1B NICs.^M April 2022. And then you have to pay 6 to 1.25% new levy^M April 2023.

The good news is a little bit. If you are eligible for an employer’s NICS relief and allowances, you will be able to apply them to the new tariffs when it comes to law.

Why new taxes are being imposed?

The government has always said that these new tariffs (starting with the NI increase) are aimed at raising money for the NHS, funding NHS workers’ wage increases and helping the social care sector. It hopes to raise 12 12 billion a year, with 2 2.2 billion going to the governments of Wales, Northern Ireland and Scotland.

An official spokesman said: “We have taken decisive and historic steps with the health and social care tariffs to raise about bn 13bn a year for the NHS and social care. This is a progressive tax for those who pay more.

“It addresses the backlog of epidemics created by NHS operations and procedures, strengthens the adult social care system so that people do not have to bear the financial risk of catastrophic care costs themselves, including people above and below the country, and 3% pay for nurses. -Funds for growth.

But there has been a lot of press rumbling and public concern from some members of the government, who think the tax hike should be stopped. In the face of the crisis of life, many feel that it is too much on top of rising fuel bills, rising inflation and rising commodity prices.

The chancellor may decide to suspend this tax increase, we will all have to wait and see what this April’s budget brings.

Tony Shanks
Director of Operations
ATT member