National Insurance (NI) is a tax paid by employers, employees and self-employed individuals. National insurance contributions are mandatory for people aged 16 or over, up until state retirement age, provided you earn over certain limits.
Currently, you have to pay NI if you earn either:
- Over £823 per month (£9,880 per year) as an employee
- More than £6,725 a year in profit when self-employed
National Insurance threshold changes in July
The National Insurance threshold is the level of earnings where you have to start making the tax contributions. As announced in the Spring Budget Statement, on 6th July 2022, the threshold is being changed to £12,570 a year (previously £9,880). This is in line with the threshold for starting to pay income tax too. The higher-rate threshold will remain at £50,270.
How much NI tax will you pay?
The amount of National Insurance tax you pay is worked out as a percentage, so is dependent on your earnings. The percentage varies depending on your circumstances, and whether you are applicable to paying the higher rate (if you earn over £50,270.
Employees
- Main rate – 13.25%
- Higher rate – 3.25%
Self-employed
- Main rate – 10.25%
- Higher rate – 3.25%
Employer
- Main rate – 15.05%
- Higher rate – 15.05%
Will you benefit from these changes?
If you currently pay National Insurance tax, your contributions will go down starting from July 2022. For example, based on a £20,000 salary, your contribution will go down from £112 a month to £82 (a £30 per month saving).
Why has the rate changed?
A new health and social care levy was introduced in April 2022, which increased NI contributions by 1.25%. It was introduced to help the NHS and equivalent bodies in the UK.
From April 2023, NI will revert to its old level but a new Health and Social Care Levy, at that same 1.25% rate, will be paid separate to national insurance contributions, becoming a tax in its own right.
There are also increases on the way for pensioners. Pensioners who are still working after the state pension age (currently 66) don’t pay national insurance. However, from April 2023 the new levy will be deducted from their earnings.
As accountants we aren’t here for just filling out your paperwork, we are here for advice and support. If you’re unsure about what you need to do this year, get in touch with us by emailing on [email protected].