The UK government has recently announced a national insurance increase that will come into effect in April 2022. This increase will affect both employees and employers and is designed to help fund the NHS and social care.
In this blog post, we'll explain what the national insurance increase means for you as an employee or employer, and how you can prepare for the changes.
What is National Insurance?
National insurance is a tax that is paid by both employees and employers in the UK. It helps to fund social security benefits, such as the state pension, as well as the NHS and other public services.
Employees and employers each pay a percentage of the employee's earnings towards national insurance. Currently, the employee contribution rate is 12% on earnings above £184 per week, and the employer contribution rate is 13.8% on earnings above £170 per week.
What is the National Insurance Increase?
The government has announced that the national insurance rates will increase by 1.25% from April 2022. This increase will apply to both the employee and employer contribution rates, and will also apply to self-employed individuals.
The additional revenue generated by the national insurance increase will be used to fund the NHS and social care. The government has estimated that the increase will raise around £36 billion over the next three years.
What Does the National Insurance Increase Mean for Employees?
As an employee, the national insurance increase means that you will pay more in national insurance contributions from April 2022. If you earn more than £184 per week, you will pay an additional 1.25% on your earnings above this threshold.
For example, if you earn £30,000 per year, you currently pay £2,324 in national insurance contributions. With the 1.25% increase, your national insurance contributions will increase by £180 per year.
What Does the National Insurance Increase Mean for Employers?
As an employer, the national insurance increase means that you will also pay more in national insurance contributions from April 2022. If you have employees who earn more than £170 per week, you will pay an additional 1.25% on their earnings above this threshold.
For example, if you have an employee who earns £40,000 per year, you currently pay £5,528 in national insurance contributions. With the 1.25% increase, your national insurance contributions for this employee will increase by £500 per year.
How to Prepare for the National Insurance Increase
If you are an employee, you should be aware that your take-home pay will be slightly reduced from April 2022 due to the national insurance increase. You may need to adjust your budget and expenses to account for this change.
If you are an employer, you should review your payroll processes and ensure that you are ready to implement the national insurance increase from April 2022. You may also need to review your budget and expenses to account for the increased national insurance contributions.
Conclusion
In conclusion, the national insurance increase is set to come into effect in April 2022 and will impact both employees and employers in the UK. The increase is designed to help fund the NHS and social care, and will raise an estimated £36 billion over the next three years. As an employee or employer, it's important to be aware of the national insurance increase and how it will impact your finances. By preparing for the changes and adjusting your budget and expenses accordingly, you can ensure that you are ready for the increased national insurance contributions.
