National Insurance Rise: Everything You Need to Know

After a great deal of back and forth, the UK government has officially passed a National Insurance (NI) increase that will go into effect in April 2022. While this may come as a shock to the system, tax changes can be a good time to revaluate your budget and consider speaking with a financial adviser to ensure you have all your ducks in a row for the fiscal year ahead.

How does the NI rise work?

After April 2022, employees and employers will see a rise in taxes which will eventually become a separate tax on income from 2023. This rate will be detailed on every income earner’s payslip as the “Health and Social Care levy.” At this point, tax is rising by 1.25%.

For example, the current 12% National Insurance on earnings between £9,564 and £50,268 will rise by 1.25% to 13.25%.

Who will be affected?

All those who pay tax will be affected by this rise in National Insurance rates. While taxes for social programs often include working adults, this increase also requires employers, self-employed individuals and those over the age for the state pension to abide by the new rules.

According to a recent study* by Statista, the median annual income for a full-time worker in the UK was £31,285 in 2021. Those who make this amount of money currently pay around £2,707 but will now pay an extra £255 each year due to the 1.25% increase. *

Why has this happened?

Because of the pressure the National Healthcare System has undergone throughout the pandemic, this tax is aimed toward alleviating some of the stresses by pumping in funding. In the coming years, this money is supposed to enter the overall social care system to help older individuals and all those who need aid.

The overall goal, as stated by government representatives, is to aid those in need. However, some have raised concerns about the effect this tax will have on low-income individuals who do not receive social care aid.

How should I manage this change?

As with any change to your financial situation, it’s important to keep a keen eye on how it will affect your budget. When in doubt, don’t be afraid to contact a trusted financial adviser who can help you tackle the ins and outs of your specific situation.

If you would like to speak with one of our financial planners, please don’t hesitate to get in touch over email at  enquiries@gpfm.co.uk or call 01992500261.

This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions. Investments can go down as well as up and you may get back less than you invested. 

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About gpfm  

gpfm are an independent financial planning company dedicated to the provision of personal, professional, and objective-driven advice for our clients. We have been awarded the Chartered Financial Planners title by the Chartered Insurance Institute for offering high quality, independent and informed advice that meets the needs of our clients.

* https://www.statista.com/statistics/1002964/average-full-time-annual-earnings-in-the-uk/

* https://www.gov.uk/national-insurance/how-much-you-pay