Fact file

What the National Insurance rise means for you

Workers earning £30,000 a year will hand over at least £250 more following tax hike

Workers across the UK are braced to pay out more in National insurance under Boris Johnson's newly announced plans to boost NHS and social care funding.

The prime minister told the Commons yesterday that the 1.25% rise was "the reasonable and the fair approach" to funding much-needed changes, despite breaching a key commitment in 2019 Conservative manifesto not to increase taxes.

The tax will kick in from April 2022 as a rise in National Insurance for employees and employers, and will then become a separate tax on earned income from 2023 - appearing on an employee's payslip as a "Health & Social Care levy".

The increase is a part of “the biggest shake-up of social care in decades”, said The Telegraph. The government is also introducing a new cap of £86,000 for the cost of social care over a lifetime, and people with assets between £20,000 and £100,000 will be eligible for means-tested social care funding for the first time.

Those with savings of less than £20,000 will be eligible to receive fully funded care, while those with savings between £20,000 and £100,000 can get partial support.

Although the new social care reforms will apply only to England, the tax changes will affect the whole of the UK. But the income from the levy will be distributed across the four nations.

According to the government, Scotland, Wales and Northern Ireland will get an extra £1.1bn, £700m and £400m in funding respectively by 2024-25.

“However, health and social care are devolved and differ significantly, meaning issues such as the cap and floor for people’s personal outgoings on care will also vary,” The Guardian reported.

Breaking down the figures

Paying a National Insurance contribution is mandatory if you’re 16 or over and either an employee earning above £184 a week, or self-employed and making a profit of £6,515 or more a year.

From April 2022: 

  • the current 12% rate on earnings between £9,564 and £50,268 will rise to 13.25%
  • the current 2% rate on earnings over £50,268 will rise to 3.25%
  • employers will also have to pay more, contributing 15.05% in National Insurance on employees' earnings over £170 per week, up from 13.8% now.  

“People who earn under £9,564 don’t have to pay National Insurance or the new levy,”  the BBC reported.

But unlike National Insurance, the new levy “will also be paid by pensioners who work”, the broadcaster added. 

Impact on earners

The hikes mean “millions of Brits will be forking out up to hundreds of pounds extra each year”, said The Mirror.

According to analysis by financial services group Hargreaves Lansdown, this is how the changes will affect take-home earnings:

  • £10,000 salary: £52 paid now; £57 with 1.25% increase - £5 extra each year
  • £20,000 salary: £1,252 paid now, £1,382 with 1.25% increase - £130 extra each year
  • £30,000 salary: £2,452 paid now; £2,707 with 1.25% increase - £255 extra each year
  • £40,000 salary: £3,652 paid now; £4,032 with 1.25% increase - £380 extra each year
  • £50,000 salary: £4,852 paid now; £5,357 with 1.25% increase - £505 extra each year

A major criticism levelled at the National Insurance hike is that the anything earned above £50,000 is taxed at a rate of just 2% - so the increase will have a proportionally smaller impact on the highest earners.

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