National insurance (NI) is a tax which contributes towards benefits and pensions, covering everything from job seekers allowance to maternity leave payments. The amount you pay depends upon your employment status and earnings, while businesses have to contribute towards national insurance too.
From 6 July 2022, the starting threshold at which people have to start paying national insurance is set to increase. Class 1 National Insurance Contributions will be raised to £12,570 an increase of £2,690 over the 6 April threshold of £9,880.
The Government estimate that 2 million people will pay no NI at all and 30 million will see a decrease in their contributions, while the average saving is estimated to be around £297 per annum. However, this does have to be considered alongside the increase of 1.25% to the rate of National Insurance which came into effect on 6 April 2022.
Stevie Heafford, tax partner at HW Fisher outlines who will benefit and calculates how much you might be able to save.
The very short answer is, no. Those with lower income will save more in pure monetary terms (an individual earning £14,000 will save £342) but they will be more exposed to the general increases in cost of living as they are less likely to have any sort of “buffer”.
With the Bank of England predicting that inflation could rise as high as 12%, things are unlikely to improve any time soon.
|Annual Salary||NI Payable 2021/2022||NI Payable 2022/2023||Saving||Increase|
Employer’s National Insurance was also increased by 1.25% in April 2022 so employers may find it difficult to increase pay by any significant amount and that will also have an impact. The Pension Triple Lock was also temporarily scrapped (it will be reinstated in April 2023) so everyone will be feeling the pinch.
The changes expected to National Insurance thresholds don’t even scratch the surface with the pressures faced by so many amidst rising inflation and increased costs. There is good news in that the National Living and National Minimum Wage rates are increasing and there will be a 1% reduction in the basic rate of income tax – albeit not until April 2024.
If you would like to discuss your specific circumstances, please get in touch.