An increase of 1.25% in National Insurance Contributions from 6 April 2022 has been outlined in ‘Building Back Better: Our Plan for Health and Social Care’ .
The National Insurance Contributions rise increase will apply to:
- Class 1 (paid by employees)
- Class 4 (paid by self-employed)
- secondary Class 1, 1A and 1B (paid by employers)
The increase will not apply if you are over the State Pension age.
From 6 April 2023, the rates of NICs will return to their lower rates, when a formal legal surcharge of 1.25% commences. This will also apply to those individuals working above the State Pension age who currently do not pay NICs.
After the announcements were made, HMRC updated their guidance covering rates and thresholds for employers. This update makes it clear that the 1.25% increase will also apply to other types of NICs:
- Class 1A NICs on Benefits in Kind.
- Class 1B NICs in respect of PAYE Settlement Agreements.
In both cases, the current 13.8% rates will become 15.05% from 6 April 2022.
NI classes 2 and 3 are not affected by the proposed increase.
On NICs thresholds: the government has chosen not to reveal the thresholds at which NICs applies from 2022-23. This makes it difficult to accurately measure the actual cost of the proposed rise.
If you’re self-employed
You pay Class 2 and Class 4 National Insurance, depending on your profits. Most people pay both through Self Assessment.
You may be able to pay voluntary contributions to avoid gaps in your National Insurance record if you:
- have profits of less than £6,515 a year from your self-employment
- have a specific job (such as an examiner or business owner in property or land) and you do not pay Class 2 National Insurance through Self Assessment
If you have gaps and do not pay voluntary contributions, this may affect the benefits you can get, such as the State Pension.
If you’re employed and self-employed
You might be an employee but also do self-employed work. In this case your employer will deduct your Class 1 National Insurance from your wages, and you may have to pay Class 2 and 4 National Insurance for your self-employed work.
How much you pay depends on your combined wages and your self-employed work. HM Revenue and Customs (HMRC) will let you know how much National Insurance is due after you’ve filed your Self Assessment tax return.