News
National Insurance Increase April 2022
24 - 09 - 2021
The UK Government has announced that National Insurance (NI) rates on earnings will be increased on 06 April 2022.
What are the funds raised being used for?
The additional taxation raised is intended to be used to fund the NHS and social care across the UK.
Who does this affect?
The new National Insurance increase will apply to:
- Class 1 NI paid by employees
- Secondary Class 1, 1A and 1B NI paid by employers
- Class 4 NI paid by the self-employed
Class 1 National Insurance is paid by employees and employers based on salary.
Class 4 National Insurance is paid by the self-employed based on profit.
Will this affect me immediately?
No. The increase will be effective from 06 April 2022. Each year the UK Government considers the rates and thresholds for both Income Tax and National Insurance to be applied at the beginning of a new tax year. Since the 2011/2012 tax year whilst the National Insurance thresholds have increased the National Insurance rates have remained constant.
What are the Class 1 Employee / Employer National Insurance Rates?
The Class 1 National Insurance rate is dependent on the earnings of the employee including directors. Please note NI is calculated on a payment by payment basis depending on whether the employee is weekly, monthly or annually pad. The only exception to this is Company Directors who are assessed on an annual basis. If you want further information regarding the annual basis for Directors please request our Directors National Insurance Advice Note.
The Current 2021/2022 tax year Class 1 NI earnings thresholds are as follows:
|
Threshold |
Threshold Value Per Annum
|
|
Lower Earnings Limit (LEL) |
£6,240 |
|
Primary Threshold (PT) |
£9,568 |
|
Secondary Threshold (ST) |
£8,840 |
|
Upper Earnings Limit (UEL) |
£50,270 |
The Current 2021/2022 tax year Class 1 NI rates are:
|
Threshold |
Employee |
Employer |
|
Between LEL and PT |
0% |
n/a |
|
Between PT and UEL |
12% |
n/a |
|
Above UEL |
2% |
n/a |
|
Above ST |
n/a |
13.8% |
No announcement has been made with regard to the Class 1 NI Thresholds with for the 2022/2023 tax year. However the new Class NI rates announced will be as noted below.
2022/2023 tax year Class 1 NI Rates are:
|
Threshold |
Employee |
Employer |
|
Between LEL and PT |
0% |
n/a |
|
Between PT and UEL |
13.25% |
n/a |
|
Above UEL |
3.25% |
n/a |
|
Above ST |
n/a |
15.05% |
What are the Current Class 4 Self-Employed National Insurance Rates?
The Class 4 NI is dependent on the self-employment profit above a certain threshold. Unlike the Class 1 Thresholds the Class 4 thresholds have altered each tax year:
The tax year Class 4 NI profit thresholds are as follows:
|
Threshold |
2021/2022 NI Rate |
2022/2023 NI Rate |
|
Profits between £9,569 and £50,270 |
9% |
10.25% |
|
Profits greater than £50,270 |
2% |
3.25% |
No announcement has been made with regard to the Class 4 NI Thresholds with for the 2022/2023 tax year.
If I am over State Pension Retirement age will I be affected?
No.
The 2022/23 increase will not affect you if you are over State Pension age. Your employer, however, will be affected.
Is this increase going to affect tax years after 2022/2023?
The increase in National Insurance introduced in 2022/2023 is intended to become a new tax in 2023/2024 to be called a “Health & Social Care Levy”. The Levy will be distinct from National Insurance which will revert to the lower rates from April 2023. Revenue from the Levy will be ‘ringfenced’ for health and social care.
The levy will be paid by all employees and employers and is expected to be shown as a separate item on the payslip. The Levy will also be applied to anyone working over State Pension age.
Please be aware that the advice and proposals regarding tax changes in the current economic climate are constantly changing and before acting on any of the above you should check the current situation with:
If you would like to discuss any of the issues noted above please contact us on:
01244 625 500 or 01978 364 000
contactus@foremansllp.com
Whilst all due care and attention has been taken in the preparation of these notes no liability
can be accepted for any omission or item contained therein.
Foremans LLP
September 2021
