National Insurance (NI) recently hit the headlines due to the government’s plans to increase contributions in April 2022 to help fund social care. This was also confirmed in the Chancellor’s Budget 2021, bringing the announcement back to public attention.
The last major change was in 2003, with Gordon Brown’s plan to raise National Insurance by 1% to fund the NHS. This time around, there will be an increase of 1.25 percentage points.
Both these policies have been widely criticised due to the impact on take-home pay, with calls for a wealth tax.
So, let’s look at what has changed in recent years to put the upcoming change into perspective.
A bit of background on National Insurance
Introduced in 1911, National Insurance is paid by employees, employers, and the self-employed to fund and allow entitlement to state benefits (state pension, statutory sick pay, maternity pay, etc). The amount paid depends on the assigned band or class, and some people are exempt from paying it depending on the relevant criteria.
Here are the key bands for employees (Class 1):
- Lower Earnings Limit – NI not applicable
- Primary Threshold – NI becomes applicable
- Upper Earnings Limit – a different rate applies for higher earners
The National Insurance thresholds typically change annually, but rates (%) have remained unchanged in recent years. Employees’ contributions are automatically deducted from their payslips, employers pay their contributions usually monthly, and the self-employed pay it through the Self Assessment process as a percentage of their profits.
Changes over the past decade
Below, we’ve listed National Insurance thresholds over the last 10 years. You’ll see that the percentage of contributions has stayed the same – the only thing that has changed is the threshold for the bands.
Note: This list only accounts for the bands eligible to pay National Insurance and does not include other rates e.g. married women’s reduced rate. It only applies to employees (those who work under an employment contract) and does not consider employer contributions or rates for the self-employed (i.e. it only considers employee Class 1 National Insurance).
Employee NI rates by earning thresholds
2021-22
- 12% for earnings of £184-£967 weekly
- 2% for earnings of over £967 weekly
2020-21
- 12% for earnings of £183 – £962 weekly
- 2% for earnings of over £962 weekly
2019-20
- 12% for earnings of £166 to £962 weekly
- 2% for earnings of over £962 weekly
2018-19
- 12% for earnings of £162 to £892 weekly
- 2% for earnings of over £892 weekly
2017-18
- 12% for earnings of £157 to £866 weekly
- 2% for earnings of over £866 weekly
2016-17
- 12% for earnings of £155 to £827 weekly
- 2% for earnings of over £827 weekly
2015-16
- 12% for earnings of £156 to £815 weekly
- 2% for earnings of over £815 weekly
2014-15
- 12% for earnings of £153 to £805 weekly
- 2% for earnings of over £805 weekly
2013-14
- 12% for earnings of £149 to £797 weekly
- 2% for earnings of over £797 weekly
2012-13
- 12% for earnings of £146 to £817 weekly
- 2% for earnings of over £817 weekly
2011-12
- 12% for earnings of £139 to £817 weekly
- 2% for earnings of over £817 weekly
Changes to National Insurance coming April 2022
The 1.25% levy in National Insurance Contributions commences 6th April 2022, marking the new tax year. It impacts working-age employees, employers, and the self-employed (Class 4).
Here’s what the increase means for employees:
2022-23 rates
- 13.25% for those within the Primary Threshold
- 3.25% for those within the Upper Earnings Limit
The average UK salary (from the last full tax year) was £31,461. An employee with a salary of £30,000 will end up paying another £255 on top of the £2,451 that is currently deducted.
The tax rise is estimated to bring in £12bn each year for social care funding – including the NHS.
Codapay is set for the changes
Rest assured our payroll software is ready prepared to meet the planned tax rises. Codapay’s payslips will continue to remain compliant with HMRC tax requirements from April 2022. Our specialist team ensure you’re always ready for upcoming tax legislation.
Have any questions? Get in touch with us.
