How much national insurance will I pay? Rise in UK tax contributions, new NI rate and why increase - explained

Prime minister Boris Johnson breaks Conservatives manifesto pledge not to increase national insurance taxes

National insurance contributions will rise, Boris Johnson has confirmed.

The UK prime minister set out plans to increase the tax on millions of workers to help social care reform and clear the NHS backlog brought on by the Covid pandemic.

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Mr Johnson, speaking to the House of Commons, acknowledged the new health and social care levy breached a Conservative Party commitment in its 2019 general election manifesto.

But “a global pandemic was in no-one’s manifesto”, Mr Johnson told MPs on 7 September 2021.

Here’s how much national insurance contributions will rise in the UK, the new rates and Mr Johnson’s reasoning explained - and when the hike in NI payments will begin.

How much will national insurance increase?

National insurance contributions will rise by 1.25 percentage points for UK workers, prime minister Boris Johnson has confirmed.

The new health and social care levy will be paid by all working adults, including those over the state pension age - unlike other NI contributions.

Downing Street said that a typical basic rate taxpayer earning £24,100 would contribute £3.46 a week, while a higher rate taxpayer on £67,100 would pay £7.15 a week.

In addition to the health and social care levy, there will also be a 1.25 percentage point increase in the dividend tax - to ensure those who receive their income from shares also contribute.

No-one will have to pay more than £86,000 for care costs in their lifetime.

Scotland, Wales and Northern Ireland will receive an additional £2.2 billion in additional health and social care spending from the levy.

Why are national insurance contributions increasing?

The impact and cost of the Covid pandemic has resulted in a substantial NHS backlog and need for social care reform.

PM Boris Johnson said the additional revenue would pay for the biggest catch-up programme in the history of the NHS in England.

The levy will raise £12 billion a year to help deal with the backlog of cases built up during the pandemic and also cover the reform of the social care system in England.

Mr Johnson told MPs he believed the tax hike was “reasonable”.

He said: “No Conservative government ever wants to raise taxes and I will be honest with the House - yes, I accept that this breaks a manifesto commitment, which is not something I do lightly.

“But a global pandemic was in no one’s manifesto and I think the people of this country understands that in their bones and they can see the enormous steps this government and the treasury have taken.

“After all the extraordinary actions that have been taken to protect lives and livelihoods over the last 18 months, this is the right, the reasonable and fair approach.”

When is the national insurance rise taking effect?

The rise in national insurance contributions will take effect from April 2022.

From 2023, the health and social care levy element will then be separated out and the exact amount employees pay will be visible on their pay slips.

From October 2023, anyone with assets under £20,000 have their care costs fully covered by the state, while those with between £20,000 and £100,000 will be expected to contribute to their costs but will also receive state support.

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