BRITS will face bigger tax bills from next April, as Boris Johnson has announced a National Insurance hike to fund social care.
Everyone who is employed and earns more than £184 per week has to pay an NI bill, and the rise will leave people £373.75 a year worse off on average.
Currently, everyone has to pay 12% on earnings between £9,564 and £50,268 and a further 2% is paid on any wages over that.
Here's everything you need to know about the current national insurance thresholds and how they are changing:
What is National Insurance?
National Insurance is a tax on your earnings.
Your National Insurance contributions are paid into a fund, from which some state benefits are paid.
This includes the state pension, statutory sick pay or maternity leave, or entitlement to unemployment benefits.
If you are a UK national, you should receive an NI number (and NI card) automatically before you turn 16.
This number allows the government to track your earnings and levy the right amount of tax.
Who currently pays it?
You pay National Insurance if you’re 16 or over and either:
- an employee earning above £184 a week
- self-employed and making a profit of £6,515 or more a year
It is deducted from your wages each month.
If you're employed, you can see how much you pay by looking at your pay slip.
Once you reach state pension age, you don't need to pay it at all.
There are different types of National Insurance (known as ‘classes’), and the type you pay depends on your employment status and how much you earn, and whether you have any gaps in your National Insurance record.
Why do I need to pay it?
Paying National Insurance entitles you to some state benefits, though these vary according to your employment status.
If you haven't met the minimum amount of contributions, you may not qualify for some benefits.
For instance, you need to pay National Insurance for a set number of years to be entitled to receive the state pension.
You need at least 10 years worth of contributions to get any state pension at all, and 35 years to get the full amount.
What are the thresholds and how much do I pay?
The threshold for National Insurance payments is £9,568 a year for employed workers and £6,515 for self-employed people.
At the moment, most people pay 12 per cent on anything they earn up between £184 and £967 per week. You have to pay 2% on anything you earn over £967 a week
For example, if you were to earn £1000 a week:
- You pay nothing on the first £183
- 12% up to £962, which equals £93.48
- Then 2% for the remaining £38, which equals £0.76 – leaving a total of £94.24
If you earn between £120 and £184 a week, your contributions are treated as having been paid to protect your National Insurance record.
You’ll pay less if:
- you’re a married woman or widow with a valid ‘certificate of election’
- you’re deferring National Insurance because you’ve got more than one job
Why are rates rising and when will it happen?
The UK government has said that from next April, Brits will have to pay a higher NI bill.
Rates will rise by 1.25% and the money 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 (paid by employers)
The average salary in the UK is £29,900.
ABC Finance calculates that people on this wage will be forced to pay an increase of £255 from next April.
Earlier this year it emerged that servicemen's partners could be missing out on £250 in National Insurance credits – given to ensure that partners who were unable to work during those times do not miss out on entitlement to the State Pension.
Meanwhile, hundreds of thousands of newly-retired women are being urged to check whether they’re entitled to £129 a week as part of a “little-known” state pension boost, because of a scheme which began in the 1940s.
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