Millions of workers across Scotland and the rest of the UK will see National Insurance Contributions (NICs) go up by 1.25 percentage points from today as households continue to face mounting cost-of-living pressures.
The tax rise comes on top of soaring energy bills and sky-high inflation, which is currently at 6.2% but expected to rise even higher this month. However, despite the National Insurance increase continuing to cause political unrest between parties in Westminster, the change is now in effect and will impact take-home pays from this month.
From April 6, employer and employee National Insurance Contributions will be put up, with the rate going back to its 2021/22 level for the 2023/24 financial year, and the income stream replaced by a new health and social care levy of 1.25% - the proposal is predicted to raise £12 billion annually.
Here is everything you need to know about the changes to National Insurance Contributions and the National Insurance threshold increase coming July.
What is National Insurance?
National Insurance is a tax on earnings paid by employees, employers and the self-employed who pay it on their profits.
National Insurance is used to pay for the NHS, state benefits and the State Pension.
What are the changes to National Insurance Contributions?
Employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance Contributions from April 6, 2022.
Who pays National Insurance?
- Employees pay NI on their wages
- Employers also pay extra NICs for staff
- Self-employed pay NI on their profits
From April 2023, National Insurance will return to its current rate, and the extra tax will be collected as a new Health and Social Care Levy.
This levy will also be paid by people over State Pension age who continue to work.
How much will I pay under the new plans?
The amount of National Insurance Contributions you pay depends on your salary, however people earning under £9,880 don't have to pay National Insurance and won't have to pay the new levy.
From July the National Insurance threshold will be the same as the income tax threshold, known as the personal allowance.
That means you won’t pay National Insurance or income tax if you earn below £12,570 a year. If you earn more than this, you will still feel the benefit as you will pay less National Insurance overall due to the higher threshold.
Salary and new monthly National Insurance Contributions from April and July
£20,000
- From April 6: £122
- From July 6: £82
£30,000
- From April 6: £222
- From July 6: £192
£40,000
- From April 6: £333
- From July 6: £303
£50,000
- From April 6: £443
- From July 6: £413
£60,000
- From April 6: £472
- From July 6: £443
£70,000
- From April 6: £499
- From July 6: £470
£80,000
- From April 6: £526
- From July 6: £497
£90,000
- From April 6: £554
- From July 6: £524
£100,000
- From April 6: £581
- From July 6: £551
You can read more about the changes to NICs in the new Build Back Better: Our Plan for Health and Social Care document on the GOV.UK website here.
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