The amount you pay in NI is changing this month, although this time around you should see more money on your payslip rather than less.
National Insurance is the tax paid on earnings by employees and employers and is paid by the self-employed on profits. It funds the state pension and other other benefits as well as contributes towards the NHS.
From the 6th July, the amount you can earn before you start making contributions, either through employment or self-employed profits, is rising from £9,880 to £12,570, bringing it on par with the income tax personal allowance.
This means you no longer pay national insurance or income tax if you earn below £12,570 a year. Compared to previous years, it is estimated that 30 million people are set to pay less national insurance and earn an average of £330 more in their pay packet during the year.
For those earning under £40,000, the higher thresholds will offset the payslip costs incurred by the new health and social care levy that came into force in April 2022. This was the 1.25% increase in the pound for NI as part of the government's plan to fund the NHS and social care, although they have said it will return to its old rate from April 2023.
Whilst it is great news for most workers, higher earners will pay more. HMRC figures show that there are 6.1 million higher and additional rate taxpayers, up from 4.25 million in 2019. Frozen tax thresholds and wage inflation are dragging more people into the higher tax brackets.
How much National Insurance will I pay?
The table below shows your new annual national insurance bill in April and July. As you can see, all workers will see a fall in their national insurance bill in July compared to April; in fact many workers will pay less in July than they did last year.
Source: Blick Rothenberg