A warning has been issued to anyone with a National Insurance number as rates are set to rise.
The government confirmed the tax will increase from April 2022 to fund social care and help the NHS recover after the pandemic.
The hike means employees, employers and the self-employed will pay 1.25 pence more on the pound for National Insurance Contributions - as The Daily Record reports.
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The Senior Personal Finance editor at Money.co.uk warned this will be the equivalent to a 10 per cent increase in deductions from pay packets for most people across the country.
James Andrew said: "With National Insurance (NI) increasing by 1.25% points in April, it’s no surprise that many UK workers think this means their payments are going up by only a fraction.
“However, that figure relates to the rate, and this means that for most people contributions are actually increasing by more than 10%.
The finance expert said the hike could not be coming at a worse time after Ofgem confirmed the energy price cap will increase by 54% in April.
He continued: “With the country in the midst of a cost of living crisis, the increased rate is set to affect millions of workers, particularly those on lower wages.
"For those people, the rise comes at a bad time, after research published last month showed that average personal debt in 2021 more than doubled in the space of just 12 months to a whopping £25,879 a person.
"This extra charge kicks in at exactly the same time as the expected 50% rise in the energy price cap that is set to add hundreds of pounds to the cost of heating our homes.”
However, Chancellor Rishi Sunak and Prime Minister Boris Johnson has described the policy as "progressive" and insisted it is right to follow through on the policy.
They said in The Sunday Times: "We must clear the Covid backlogs, with our plan for health and social care - and now is the time to stick to that plan. We must go ahead with the health and care levy. It is the right plan."
How much National Insurance will increase by after the rise
From April, if you earn less than £9,880 a year or £823 a month, then you don’t have to pay National Insurance and the new levy does not apply to you.
Anyone earning more than £12,875 will pay more.
Salary and new National Insurance Contribution
- £20,000 - will pay an extra £89 a year
- £30,000 - will pay an extra £214 a year
- £50,000 - will pay an extra £464 a year
- £80,000 - will pay an extra £839 a year
- £100,000 - will pay an extra £1,089 a year
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.
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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