Millions of taxpayers have been hit by the 1.25 percent rise in National Insurance (NI) on top of soaring inflation and energy bills.
The new rate of 13.25 percent will apply to people paying the Class 1 National Insurance rate on income between £184 to £967 a week (£797 to £4,189 a month).
While some people will be liable to pay more, others will be exempt from paying. So, what are the new thresholds coming in later this year and how much might you have to pay?
Who will be impacted?
Chancellor Rishi Sunak has moved forward with the National Insurance increase initially planned in the 2021 Autumn Budget. Sunak has claimed that these rises are necessary to raise £12billion which will fund health and social care and the National Health Service.
While NI has been hiked to 13.25 percent for millions of taxpayers this year, not everyone will be taxed the same. Lower earners are exempt from paying NI, and as discussed, the new rates will only apply to those earning between £184 and £967 a week.
In April 2023, the increase will be separated into a 1.25 percent Health and Social Care Levy which has been introduced as an extra tax to fund health and social care and to help the NHS recover from the effects of the COVID-19 Pandemic.
Pensioners who are still working after reaching state pension age will also have to pay the new levy, as long as they are earning more than £184 a week.
What relief is available for taxpayers?
From 6th July 2022, the threshold at which workers have to start paying NI will increase from £9,880 to £12,570 a year. This was in a bid to help people through the current cost of living crisis.
Sunak commented that the threshold increase is:
‘A £6billion personal tax cut for 30 million people in the UK.’
This will naturally come as a relief to many taxpayers. However, experts say middle-income earners will be the worst hit.
Research carried out by Income Tax UK found that those earning an average salary of £30,000, will lose a staggering nine percent of their salary. Therefore, the raising of the threshold will be of little comfort to those in the middle of the scale who will be most impacted.
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