National Insurance contributions are due to go up by 1.25 percentage points next month as consumers face mounting cost-of-living pressures.
The tax rise will come on top of soaring energy bills and escalating UK inflation, which has now reached a fresh 30-year high of 5.5%.
However, despite the National Insurance decision causing a row in Westminster, with some Conservative MPs calling on Prime Minister Boris Johnson to drop or at least postpone the increase, a survey of 1,050 British adults has found that 31 per cent of people do not know very much about the tax rise and 12 per cent know nothing about it.
Only four in 10 rated their knowledge about the impending financial hit as "at least fair", while just a tenth of those polled said they know a great deal about the change.
From April 6, employer and employee National Insurance contributions will be put up, with the rate going back to its 2021/22 level the following 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 NICs and how it will affect your monthly pay.
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 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 NICs you pay depends on your salary, however people earning under £9,568 don't have to pay National Insurance and won't have to pay the new levy.
Salary and new National Insurance Contribution
- £20,000 - will pay an extra £130 a year (£10.80 per month)
- £30,000 - will pay an extra £255 a year (£21.25 per month)
- £50,000 - will pay an extra £505 a year (£45.80 per month)
- £80,000 - will pay an extra £880 a year (£73.33 per month)
- £100,000 - will pay an extra £1,130 a year (£94.16 per month)
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.
Get the latest money-saving and benefits news sent straight to your inbox. Sign up to our weekly Money newsletter here.
