National Insurance Increase – contributions rising to fund social care

A National Insurance Increase of 1.25% was confirmed by the government today, 7 September 2021.

These increases will apply from 06.04.2022 to 05.04.2023. This increase is to be ringfenced and spent on the NHS and social care in the UK. Dividend rates will also increase by the same amount, you can read more about this here.

The 1.25% increase will apply to the following:

  • Class 1 National Insurance contributions (these are paid by employees)
  • Class 4 National Insurance contributions (these are paid by self-employed)
  • secondary Class 1, 1A and 1B National Insurance Contributions (these are paid by employers)

This increase to National Insurance will not apply to people over the State Pension age.

How much will your annual National Insurance contributions increase by?

The government estimates that an employed basic rate taxpayer who earns the median basic rate taxpayer’s income of £24,100 per year in 2022/23 would contribute an additional £180.  Higher-rate taxpayers who is earning the median higher-rate taxpayers’ income of £67,100 per year in 2022/23 would pay an additional £715.

Class 2 self-employed National Insurance contributions and class 3 National Insurance contributions, both of which are voluntary payments, utilised to top-up state pension gaps, are not affected by this 1.25% levy.  At the current time, the 1.25% levy will not be taken from income derived from pensions.

National Insurance Increase to fund social care

Most workers in the UK pay National Insurance to fund the state benefits system, this includes pensions, social security benefits and health and social care.

This 1.25% increase is to be ringfenced to bay for health and social care, initially to help with NHS waiting lists, but ultimately for social care. Beginning in 2023, the health and social care levy element will be separated out with the amount employees pay being itemised on payslips. Unlike existing National Insurance contributions, this levy will be paid by all working adults, including those over the state pension age.

How Alexander & Co can assist your businesses

Whilst the changes do not start until 2022, these will still need to be budgeted and accounted for. At a time where businesses are beginning to recover from the effects of the pandemic and with a Corporation Tax increase scheduled for 2023, businesses should plan and take advice now to be as efficient as possible.

For an informal chat as to how we can assist your business, please get in touch with a member of our team. Our business advisors can provide strategies on how to operate more profitably and reduce any unnecessary tax burdens you may have.

Please call us on 0161 832 481, email or complete the form below and we will be in touch.

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