What Will the National Insurance Increase Mean for Employers, Employees, and the Self-Employed?
Prime Minister Boris Johnson outlined the basis of an increase in National Insurance contributions to fund Social Care this week. The proposed increase in Employer’s National Insurance is 1.25%, with the same increase proposed for both Employees and the Self-Employed.
MPs have now passed this proposal, and the increase is set to take place in the next tax year starting 6 April 2022 and return to its current rate from April 2023. However, while the rate will return to the current 12% in 2023, Employees, Employers, and the Self-Employed will still be paying extra in a separate Health and Social Care Levy in the 2023/2024 tax year.
The increase to National Insurance is meant to help with health and social care.
How Will the Rates Change?
Reviewing the current rates for the 2021-2022 tax year, Employees and Employers will currently be paying the following rates based on weekly pay.
Reviewing the current rates above, this would mean the following changes from next year:
Each Additional £1
These figures are based on annual earnings and may differ for employed earners who have earnings periods.
Changes to the Living Wage
As the National Insurance rate changes, so will the National Living Wage. Should it pass, employers will see an increase in the rate of the National Living Wage with an equivalent rise expected in the National Minimum Wage.
The current National Living Wage is at £8.91 per hour, and it has been proposed that this increases by 5.72% to £9.42 per hour.
This is currently being reviewed by the Low Pay Commission who advise the government on recommendations to the National Living Wage and National Minimum Wage.
Cost of Employment
From 6 April 2022, it’s clear that a number of costs will rise for Employers. Account managers at PSI Global will be working closely with our clients over the coming months and early in 2022 to ensure that you know exactly what those increases mean and what they will be. Our team will also be working closely with our workers so you understand what your net pay will be and what the impact to you will be.
Should you have any questions now about what this could mean, please feel free to call our team on 0800 009 2997 and they will direct you to a team member that can help to walk you through everything.