How much more National Insurance will I pay? UK tax increase, new rate and what rise means for me - explained

The government says the National Insurance hike will help with health and social care - but it is highly controversial as people struggle with the cost of living crisis

Millions of workers will pay more National Insurance contributions from 6 April, as part of a larger plan to raise billions for the NHS and social care.

The hike, first announced in Autumn 2021, sees NI payments rise from 12% to 13.25% despite pressure for it to be put off as the cost of living soars.

What is National Insurance?

National Insurance is a tax on earnings, paid by employers and employees, and allows workers to qualify for certain benefits and the state pension.

National Insurance is mandatory from the age of 16 for employees earning above £184 each week or for those who are self-employed and making a profit of £6,515 or more annually.

Once you have reached the age to qualify for the state pension, National Insurance is no longer paid.

If you are employed, or self-employed but work for an employer, you’ll pay Class 1 National Insurance contributions.

If you’re self-employed, you pay Class 2 and Class 4 NICs, depending on your profits.

The amount of National Insurance paid is calculated on your gross earnings, before tax or pension deductions, above certain thresholds.

Who will be affected by the rise? 

Previously, National Insurance was paid on earnings above £9,568 a year.

But now, anyone with an annual earning above £9,880 will be paying the new 13.25% amount from 6 April 2022.

Someone working full time on minimum wage, earning nearly £20,000, will end up paying £1,341, which is £89 extra per year than the £1,252 it was previously.

Anyone earning over £50,270 will be paying 3.25% in NI, which has increased by 1.25 percentage points from the 2% it was previously.

For those with a £20,000 salary, NIC from 6 April will be £112 a month.

  • £30,000 salary - NIC is £222 a month 
  • £40,000 salary - NIC is £333 a month 
  • £50,000 salary - NIC is £443 a month
  • £60,000 salary - NIC is £472 a month
  • £70,000 salary - NIC is £499 a month 
  • £80,000 salary - NIC is £526 a month 
  • £90,000 salary - NIC is £554 a month 
  • £100,000 salary - NIC is £581 a month 

What did the Spring Statement say regarding National Insurance? 

In his Spring Statement, Chancellor Rishi Sunak announced that from 6 July 2022, the threshold for National Insurance will rise by almost £3,000.

This means anyone earning under £12,570 will not have to pay National Insurance from July of this year.

The Institute for Fiscal Studies (IFS) calculates when taking the rate hike and threshold increase together, the National Insurance bill will fall for anyone earning less than £35,000, for the 2022/23 tax year - compared to the previous year.

Those earning more than £35,000 will pay more, the IFS calculates.

From 6 July, depending on your salary, NIC will change as follows:

  • £20,000 salary - £82 a month.
  • £30,000 salary - £192 a month
  • £40,000 salary - £303 a month
  • £50,000 salary - £413 a month
  • £60,000 salary - £443 a month
  • £70,000 salary - £470 a month
  • £80,000 salary - £497 a month
  • £90,000 salary - £524 a month
  • £100,000 salary -£551 a month

PM defends National Insurance hike 

Prime minister Boris Johnson has defended the NI hike, arguing that the rise is “necessary, fair and responsible”, despite the Conservative Party 2019 election manifesto, which helped Johnson win by a landslide majority, pledging “not to raise the rates of income tax, national insurance or VAT”.

The UK Government predicts the tax rise will raise £39 billion over the next three years to help tackle the Covid-induced NHS backlog, which has a waiting list above six million, and later reform long term adult social care.

Mr Johnson said: “We must be there for our NHS in the same way that it is there for us.

“Covid led to the longest waiting lists we’ve ever seen, so we will deliver millions more scans, checks and operations in the biggest catch-up programme in the NHS’s history.

“We know this won’t be a quick fix, and we know that we can’t fix waiting lists without fixing social care.

“Our reforms will end the cruel lottery of spiralling and unpredictable care costs once and for all and bring the NHS and social care closer together.

“The levy is the necessary, fair and responsible next step, providing our health and care system with the long term funding it needs as we recover from the pandemic.”

Chancellor Rishi Sunak said the government would “not shy away from the difficult decisions” and that ministers need to “fix our social care system and slash NHS waiting times”.

He said the levy would also be used to cap the cost of care so “people no longer live in fear of losing everything”.