National Insurance contributions to hit 13.25% this year – how much will you need to pay?

Martin Lewis discusses the National Insurance increase

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Last year, the Government announced drastic plans involving an extra tax to pay for its social care ambitions and NHS recovery following the pandemic. Workers, the self-employed and employers will see their National Insurance contributions rise by 1.25 percent from as part of the Government’s proposal. Employees pay their National Insurance from their wages, while their bosses make extra contributions on behalf of their staff. Those who are self-employed pay National Insurance on their profits.

However, the Government has pledged to return the rate of National Insurance to what it is currently in April 2023, with the additional tax being collected as the new Health and Social Care Levy.

This pending tax will also be paid by those above the state pension age who continue to work, which makes it different to National Insurance.

The Government’s hike on National Insurance contributions have received criticism for being perceived as a tax on working-age people, the majority of whom are younger and have less savings.

Ahead of the upcoming changes to National Insurance contributions, many people are wondering just how much they will need to pay as part of the tax rise.

As a result of the increase, workers will see their contributions go up an additional £130 if they pay more than £20,000.

Those earnings over £30,000 and £50,000 will see their National Insurance payments increase by £255 and £505 annually, respectively.

Anyone who gets £80,000 or more a year will have to pay an extra £880 in National Insurance during 2022.

For the people who earn over £100,000, their National Insurance contributions will soar by £1,130.

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Currently, employees pay 12 percent National Insurance on earnings between £9,564 and £50,268.

Anyone’s salary or earnings which comes above this amount attracts a rate of just two percent.

When the Government’s changes to National Insurance are implemented, millions of Britons will be paying National Insurance at 13.25 percent.

However some experts, including those at Nerdwallet, believe the tax rise will only amount to around £21.30 in lost income each month for someone earning £30,000.

According to a survey conducted by Nerdwallet, some 79 percent of respondents said they were unhappy with the pending tax rise on their earnings.

Some 54 percent of those polls said they believed hiking National Insurance contributions is not the ideal way for the Government to finance the NHS and social care.

In response to the Government’s decision, 69 percent of those who took part in the survey admitted that they are planning to change their spending habits ahead of the changes to National Insurance.

Connor Campbell, a personal finance expert at NerdWallet, explained: “Of course, rising costs are never welcome. And for those living on the breadline, the smallest loss can have the biggest impact.

“However, we recommend that Brits thoroughly research how the National Insurance hike will affect their day-to-day finances before making any drastic changes.

“This will provide the best platform from which to create or alter their budget and make any necessary adjustments to spending habits.”

He added: “At the same time, the hike is just one of many extra costs set to hurt the bank accounts of the British public, with higher energy prices and rising inflation already squeezing people’s budgets.

“So, you can’t blame Brits for fretting over National Insurance. But the more informed you are about where your money goes, the better equipped you will be to deal with any changes.”

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