From July 2022, there will be an increase to the annual National Insurance thresholds for employees, and for the self-employed – the point at which individuals start to pay the main rate of National Insurance contributions (NICs) on their earnings, or their profits.
If an employee earns below £12,570 a year they will no longer pay NICs, this increases the Primary Threshold and Lower Profits Limit by £2,690 from the current £9,880 and brings them in line with the income tax personal allowance.
The rise in the NICs thresholds will reduce tax by an average of £330 per employee in the year from July. The equivalent saving for a typical self-employed person would be worth over £250. Around 70% of NICs payers will pay less NICs, even after accounting for the introduction of the Health and Social Care Levy.
July is the earliest date that will allow all payroll software developers and employers to update their systems and implement the changes.
Class 1 National Insurance thresholds from 6 July 2022
Employers and employees pay Class 1 National Insurance depending on how much they earn.
- The Lower Earning Limit (employees do not pay NICs) remains the same at £123 a week;
- The Primary Threshold (employees start paying NICs) increases from £190 to £242 a week;
- The Secondary Threshold (employers start paying NICs) remains the same at £175 a week;
- The Upper Earnings Limit (all employees pay a lower rate of NICs above this point) remains the same at £967; and
- The Upper Secondary Threshold (employers of employees who are under 21 pay zero rate up to this point) remains the same at £967.
National Insurance contribution uplift
From 6 April 2022 to 5 April 2023 NICs increased by 1.25% for working age employees, employers and the self-employed. Employers saw their National Insurance contributions increase from 12% to 13.25%.
This increase becomes a new Health and Social Care Levy from April 2023 and NICs will go back down to 2021-22 levels.
From April 2023, pensioners who are still working after the state pension age will also see the new Levy deducted from their earnings.
The Government will cut the basic rate of income tax by 1ppt from April 2024. This will be the first cut to the basic rate of income tax in 16 years.