How much extra will I pay and when does the rate change?

MILLIONS of workers face a tax hike in April that will cost them hundreds of extra pounds a year.

The prime minister is pushing ahead with plans to raise the national insurance tax by 1.25 percentage points.


Taxes pay for services like social care and pensionsCredit: Blick Rothenberg

Here’s everything you need to know about the tax hike, when it’s happening and how it will affect your finances.

How are Social Security rates changing?

You pay National Insurance when you are employed and earn more than £9,568 a year, or £184 a week.

Self-employed people earning over £6,515 also pay National Insurance contributions.

The increases will affect the finances of around 25 million Britons, who will have to pay 1.25% in additional contributions.

This means rates will drop from 12% on earnings between £184 and £967 per week to 13.5%.

Charges on revenue above this amount will increase by 1.5 percentage points, from 2% to 3.5%.

How much additional national insurance will I pay?

The amount of National Insurance you pay depends on your income, with high earners paying more.

Currently, someone earning £15,000 a year pays contributions of £652, while another person earning an annual salary of £25,000 is taxed £1,852 each year.

Figures from Blick Rothenberg accounting for The Sun show how these NICs will rise when the rise is introduced in April this year.

On incomes of £10,000 it will be £5 a year more, and on incomes of £25,000 it will be £193 more.

National Insurance payments on earnings of £35,000 will increase by £318 a year, and on earnings of £50,000 they will increase by £505.

The average salary in the UK is £29,900,

ABC Finance calculates that those on this salary will be forced to pay an increase of £255 a year and £21.25 a month to National Insurance

The increase is expected to hit lower-income people harder than the wealthiest in society, the accounting firm said.

Indeed, contributions are calculated on a weekly or monthly basis, so that seasonal workers or those on a zero-hour contract may have to pay even if they earn less than the annual threshold.

National Insurance is not the same as income tax, and you also pay it separately from your income.

When will I start paying more National Insurance?

Boris Johnson said the rise would start from April 2022 when the new fiscal year begins.

Tax hikes are usually announced in the chancellor’s annual budget, such as when Rishi Sunak announced a 25% rise in corporation tax last March.

But the plan to increase National Insurance contributions was first revealed by The Sun in July last year.

National Insurance rates last increased in 2011 from 11% and 1% to the current rate of 12% and 2%.

The thresholds at which you pay each rate generally increase each year.

Why is national insurance increasing?

National insurance contributions help finance benefits such as state pension, sick pay and unemployment benefit.

The hike will go towards a cap on childcare costs – meaning pensioners won’t have to pay more than £86,000, and those with assets below £20,000 won’t have to pay anything.

Revealing his plans in the Commons, Mr Johnson said: ‘It will be irresponsible to face the costs of higher borrowing and debt.

“So from next April we will create a new 1.25 per cent tax on UK-wide earned income, mortgaged by the Health and Social Care Act, dividend rates increasing by the same amount.

The announcement broke the Tories’ manifesto, which reads: ‘We pledge not to raise the rates of Income Tax, National Insurance or VAT.’

Former Prime Minister John Major called the move “regressive”.

“I don’t think they should be using national insurance contributions, I think that’s a regressive way of doing it,” he said.

“I would rather do it in a direct and honest way and put it on taxation.”

Meanwhile, former Chancellor Lord Hammond criticized the plan when it was announced.

He told Times Radio: “Economically, politically, expanding the state further to protect private assets by asking the poor to subsidize the rich must be the wrong thing to do.”

Up to 700,000 self-employed people face higher tax bills under Boris Johnson’s welfare reforms.

Working retirees will also have to pay a new tax under the schemes.

Meanwhile, municipal tax bills could also rise at the same time, causing a double whammy for households.

Boris Johnson refuses to answer question on manifesto pledge not to increase National Insurance

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