THE Chancellor has today confirmed that National Insurance will increase, costing Brits hundreds of pounds a year.
The controversial 1.25% hike has been announced by Rishi Sunak as part of his Autumn Budget this afternoon.
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Plans of the increase were first revealed by The Sun in July, and has now been confirmed it will come into effect in April 2022 when the new tax year starts.
The government is raising national insurance payments in order to deal with the elderly care crisis, and to contribute to the NHS.
National insurance rates last increased in 2011, rising from 11% and 1% to the current rate of 12% and 2%.
The thresholds at which you pay each rate usually rise each year.
Employees pay national insurance when they earn more than £9,568 a year, or £184 per week.
Self-employed people earning more the £6,515 also pay national insurance contributions.
The increase will hit the finances of around 25million workers, who will have to pay 1.25% extra in contributions.
This means rates will rise from 12% on earnings between £184 to £967 a week to 13.5%.
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NI charges on earnings over this amount will rise from 2% to 3.5%.
The hike was announced in today’s Budget, despite Mr Sunak vowing to throw an arm around vulnerable families struggling with the cost of living with “historically high levels of public spending”.
How much extra national insurance will I pay?
The amount of national insurance you pay depends on how much you earn.
Higher earners pay more in contributions, while lower paid workers will pay less.
For example, currently someone with an annual salary of £15,000 pays £652, while another worker earning £25,000 pays £1,852 each year in contributions.
Figures from accountancy Blick Rothenberg for The Sun show how these payments will go up when the 1.25% hike kicks in.
On earnings of £10,000, it will be £5 a year more, and on earnings of £25,000, £193 more.
Contributions on earnings of £35,000 will increase by £318 a year, and on a salary of £50,000, will go up by £505.
The average salary in the UK is £29,900.
ABC Finance calculates that those on this wage will be forced to pay an increase of £255 a year and £21.25 a month in national insurance
Overall, the rise will likely impact those on lower incomes compared to higher earners, the accountancy firm said.
That’s because contributions are calculated on a weekly or monthly basis, meaning seasonal workers or those on zero hours contracts may have to pay despite actually earning less than the annual threshold.
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