Workers will pay more National Insurance from today despite a Conservative manifesto vow to not raise taxes in this government.
Employees, businesses and the self-employed will pay an extra 1.25p in the pound to help raise billions for social care.
This will appear on payslips as higher National Insurance from April 2022, and will change to a ‘health and social care’ tax from 2023.
Some MPs opposed the move amid cost of living pressures, but mitigation will instead be introduced in July, following an amendment in the Chancellor’s Spring Statement.
Under today’s changes, employees will pay more National Insurance on their wages, employers will pay extra contributions for staff, and the self-employed will pay more on their profits.
The rise in contributions by 1.25 percentage points means that, instead of paying National Insurance contributions of 12% on earnings up to £50,270 and 2% on anything above that, employees will now pay 13.25% and 3.25% respectively.
The self-employed will see equivalent rates go up from 9% and 2% to 10.25% and 3.25%.
However, who pays it is changing on July 6.
Workers and the self-employed will be allowed to earn more before they start making National Insurance payments following huge backlash from the public and MPs.
Taken together, the measures mean that, over the next 12 months, anyone earning less than about £34,000 a year will pay less in National Insurance than they did the previous year, while those earning more will see their payments rise.
Had the Chancellor stuck with his original plan, then all but the very lowest income workers would have paid more in National Insurance.
Many employers will still pay more, and business groups have warned that this may be passed on in higher prices.
1. Student loans
Millions will be forced to pay more on their student loans from today, under what has been branded a “stealth tax rise”.
Student loan repayment thresholds will be frozen from April 6 after plans to raise them by 4.6% were scrapped.
That means graduates will have to shell out more of their disposable income as wages and prices rise with inflation.
The Institute for Fiscal Studies warned the freeze will cost £30,000 earners £113 a year more than they expected.
IFS senior economist Ben Waltmann said it was “a further hit to real incomes”, adding it “effectively constitutes a tax rise by stealth on graduates with middling earnings.”
From next year, students starting university next year will begin paying off their loans when they earn more than £25,000 - down from the existing £27,295-a-year threshold.
And the length of time to repay their debt will be extended to 40 years, up from 30.
The IFS said this will leave poorer graduates paying £28,000 more over their lifetimes.
2. Sick pay increase
Statutory sick pay is rising today amid surging Covid cases and the closure of the Coronavirus Statutory Sick Pay Rebate Scheme.
This is a legal entitlement that covers all employees, including agency, casual, part time and fixed-term workers - providing you aren't self-employed. It covers you if you're unwell for four days or more.
In the UK, workers are entitled to statutory sick pay if they are an employee, are sick for four full days or more in a row (including non-working days) and earn on average at least £120 a week before tax.
It's paid by your employer, not the government.
Until now, this was £96.35 a week for up to 28 weeks - and paid by your employer as normal, with tax and National Insurance deducted on top.
However, from April 6, the amount of money staff will be entitled to earn each week, will rise to £99.35.
But with the rate of inflation standing a 6.2%, energy bills increasing and car fuel also rising sharply, the argument is that is still falls well below the cost of living, raising fears it might lead to an increase in people going to work while ill or with Covid.
Covid-19 infections in the UK are at a record high, with 4.9million people affected last week, Office for National Statistics figures show.
The number of hospital patients with coronavirus is also climbing, although levels remain well below those seen in previous waves of the pandemic.
Meanwhile, England has scrapped free coronavirus tests for most people, although some free testing for the public will continue in Scotland and Wales.
3. 20-day 'no-fault divorces'
The biggest overhaul of divorce law in 50 years comes into force today as "no fault" becomes law. That means couples no longer need to prove any wrongdoing to break up in the eyes of the law.
The change has been welcomed by experts who said it will aid couples to move forward and secure the best outcomes, eliminating unnecessary conflict and tension.
In short, it is designed to make the process simpler and less traumatic for couples splitting up. The new rules remove the need for one or both parties to have committed adultery, deserted, behaved unreasonably towards, or been separated for several years before a divorce is granted.
But some experts warn the financial fate of divorced women remains perilous. They also argue the rules do nothing to address money issues, which often account for delays.
Emma Watkins, managing director for retirement and longstanding at Scottish Widows, said it also won't address the issue of women being short-changed.
"We know from historical evidence, it's likely that women are often left short-changed," she said. "Typically, women's retirement prospects are already worse than men's but add in a divorce and they deteriorate even further."
4. National Insurance increase
Millions of workers will pay more tax on their earnings from today as higher National Insurance comes into effect to help plug a gap in social care funding.
National Insurance payments are increasing by 1.25 percentage points from April 6, up from 12% to 13.25%.
The increase is being introduced despite pressure for it to be suspended due to wider cost of living pressures - with energy, fuel and food bills all rising.
At the moment, you pay National Insurance on earnings above £9,568 a year but the threshold for when you start paying is rising to £9,880.
However, changes in the Spring Statement mean fewer people will be subject to the tax from July 6, when the threshold for who has to pay it will rise to £12,570.
The April increase will leave most workers at least £200 worse off, but from July, the Treasury estimates it will save the “typical employee” around £330 a year.
For earnings above £50,270, the rate at which you pay National Insurance is rising 1.25 percentage points today to 3.25%, up from 2%.
Employers also pay National Insurance - and that rate is going up by 1.25 percentage points too.
Find out how the new National Insurance tax rates affect you, here.
5. Ban on pension flat rate fees
Flat fees on small pension pots worth £100 or less will end from today to stop “rip-off” charges wiping out savers’ funds over time.
The changes will help workers who’ve built up many small workplace pensions through auto enrolment schemes during their working life.
For example, this could be people who have changed jobs frequently or regularly take on short-term contracts.
Rebecca O’Connor, head of pensions and savings at Interactive Investor, told The Mirror that a pension pot worth £100 could potentially disappear within five to eight years under the current rules, based on average figures published by the government.
These figures showed how average charges ranged from £13 to £20 per annum, with the highest maximum flat fee being £36, based on a survey of 20 providers.
The ban will apply to both “active” and “deferred” pots.
Under current rules, workers in the UK aged between 22 and state pension age are automatically enrolled into their workplace pension by law – providing they’re earning at least £10,000 a year.
If you don’t fall into any of those categories, you can ask to opt in.
The minimum your employer must pay in is 3%, and the overall minimum total auto-enrolment contribution is 8%. That means if they pay 3%, you’ll have to part with 5% of your earnings.
6. Higher dividend tax
The Chancellor announced a 1.25% increase to dividend tax rates from April 2022 as part of a package of measures to fund the costs of social care and the NHS.
The changes to Dividend tax rates will sit alongside increased National Insurance contributions.
The new dividend tax rates, which will apply across the UK, are:
Basic rate - 8.75%
Higher rate - 33.75%
Additional rate - 39.35%
The £2,000 dividend allowance will continue to be available and dividends received by ISA’s will remain tax-free.
