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National Insurance increase from April 2022

National Insurance increase from April 2022

Wednesday 20th October 2021

As part of Think Smart Accounts ongoing commitment to small business and individuals, we present some key facts regarding the April 2022 National Insurance increase for employees and employers. It will then become a separate tax on earned income from 2023 - appearing on an employee's payslip as a "Health & Social Care levy". Employers currently pay 13.8 per cent as the main national insurance rate with employees paying 12 per cent of their earnings.

However, increasing national insurance is contentious as it affects people of working age rather than those who have already retired. Predictably, the move has provoked outrage from small businesses, the move to increase national insurance is tough, given the challenges over the last 16 months.

With the job retention scheme now finished, many businesses are still in a state of recovery, it may be ill timed but it has been rubberstamped for the go-ahead. Please let us know your views, and for your information we have added some of the key information from HMRC.

From 6 April 2022 to 5 April 2023 National Insurance contributions will increase by 1.25%. This will be spent on the NHS and social care in the UK.

The 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.
HMRC Rates & Categories

If you're employed

You pay Class 1 National Insurance contributions, the rates for most people for the 2021 to 2022 tax year are:

Your pay £184 to £967 a week (£797 to £4,189 a month) 12%
Class 1 National Insurance rate Over £967 a week (£4,189 a month) 2%

You'll pay less if you're deferring National Insurance because you've got more than one job

Employers pay a different rate of National Insurance depending on their employees' category letters. Employers Rates

How you pay

You pay National Insurance with your tax. Your employer will take it from your wages before you get paid. Your payslip will show your contributions.

If you're a director of a limited company, you may also be your own employee and pay Class 1 National Insurance through your PAYE payroll.

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 have a specific job and you do not pay Class 2 National Insurance through Self Assessment, you need to contact HMRC to arrange a voluntary payment.

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. Self Employment Rates

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.

Company Directors

There are different National Insurance rules for company directors HMRC Directors