National Insurance Increases
From the 2022/23 tax year, the rate of National Insurance will increase by 1.25% for self-employed, employed individuals and employers. The increase is due to extra funding required for health and social care.
How this affects employees:
Employees pay National Insurance on their salary. Those with earnings less than £9,568 are outside of the threshold and therefore will not be affected by the increase.
- Class 1 National insurance will increase from 12% to 13.25% (upper rate rises from 2% to 3.25%) to help fund health and social care.
- In 2023/24 Class 1 National Insurance rates will revert to 12% with the 1.25% increase being separated and visible on payslips as a ‘health and social care levy’.
The impact on various salary levels are as follows:
| NEW RATES FROM 2022/23 | £ | £ | £ | £ | £ |
| SALARY LEVEL | 20,000 | 30,000 | 40,000 | 50,000 | 60,000 |
| WORSE OFF BY: | 130 | 255 | 380 | 505 | 630 |
How this affects the self-employed:
Self-employed individuals pay national insurance on profits. Those with profits less than £9,568 are not required to pay Class 4 National Insurance and therefore will not be affected by the increase.
- Class 4 National Insurance will increase from 9% to 10.25% (upper rate rises from 2% to 3.25%)
- In 2023/24 the rates will drop down to previous rates, with a new ‘health and social care levy’ deduction on your self-assessment tax return.
The self-employed can expect to be worse off by the same amount as the employed.
How this COULD affect Employers:
Employer’s National Insurance will also be increased by 1.25% rising from 13.8% to 15.05%. It should be noted that not all employers will be affected by this increase as some will be in receipt of the Employment Allowance which allows employers to reduce their annual liability by £4,000.
To find out more about how the increases will affect you as an employer, employee or a self-employed individual, get in touch.