How the new National Insurance Contribution Rates Affect You
This article has been updated to reflect the surprise changes announced in the budget on 23 March 2022
From April 2022 there are changes to the national insurance contribution rates. There has been some confusion over this and the new health & social care levy. It is important to remember that the two are separate measures. The health and social care levy will not be introduced until April 2023, however there will be an increase in NIC rates from April 2022.
What’s the difference?
From April 2022 the rate of employee class 1 NIC will increase from 12% to 13.25%, meaning all those people currently paying NIC will find themselves paying some extra. In the following year, April 2023, the rate for class 1 NIC will reduce back down to 12%, and a separate new health and social care levy will be introduced at the rate of 1.25%. The difference here is that the new levy will be applied to all those earning within the rates, including those of state pension age. The net effect is that for 2022 we will see a rise in NIC of 1.25% for anyone currently paying NIC, and from April 2023 that will essentially be expanded to include people of state pension age.
Seems a hike doesn’t it? In the same budget, the Chancellor announced that the NIC thresholds will be brought in line with the tax thresholds. In reality, this means a lot of people will actualy see their NIC reduce very slightly instead of increase.
Spare a thought for your employers – the NIC increases & the new levy are also being applied to your employer. Like you, they are also suffer the effects of inflation, cost of living increases, rising energy bills and petrol/diesel costs. On top of all that, national minimum wage has increased a lot in April 2022. All of these factors are hitting employers hard. It’s highly likely that any profits employers are making will be reduced this next year, and those not making much profit could see it turned to a loss. A lot of people will be looking to their employer for payrises, but I wonder if they will be as willing today as they were 5 years ago. After 2 years of trading in a pandemic, we’ve lost a lot of employers, with many more teetering on the edge. Sure, we’ve all seen the stories of the likes of BP & Shell making a ton of money whilst we pay the rising costs of oil for them, but for the small local businesses/traders, will this be the straw that broke the camels back? The chancellor’s announcement to increase employment allowance by £1,000 is of little comfort to struggling employers.
