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The government has announced its plan for funding the NHS and social care sector. This will include a new Health & Social Care Levy which will be delivered by a raise in Class 1 and Class 4 National Insurance Contributions (NICs) of 1.25%.

The 1.25% Levy in National Insurance Contributions applies from 6 April 2022 on:

Class 2 and Class 3 NICs will be unaffected.

The government paper's tax impact statistics anticipate:

NIC rates 

The proposed changes and current rates are set out below:

Proposed

Employee rate

2022-23

Current

Employee rate

2021-22

Band

Current*
weekly earnings thresholds

Proposed

Employer rate

2022-23

Current

Employer rate

2021-22

Current* weekly earnings thresholds for secondary threshold (ST) 

0% 0% LEL Up to £120 0% 0%  
0% 0% LEL- PT £120 to £184 -  
13.25% 12% PT-UEL £184 - £967  
- - ST £170 to £967 15.05% 13.8% Above £170
3.25% 2% UEL Over £967 15.05% 13.8% Above £967 

 Notes

* The 1.25% tax rise will apply to earnings above the respective thresholds in future years, the government has yet to provide details of the earnings thresholds for 2022-23.

LEL= Lower Earnings Limit
PT = Primary Threshold
ST= Secondary Threshold
UEL = Upper Earnings Limit

Rates applying to Class 1A (payable on Benefits in kind) and Class 1B (payable on PAYE Settlement Agreements) will increase from 13.8% to 15.05%. 

Proposed changes to self-employed rates

 

Proposed

2022-23

Current 

2021-22

From 2022-23*

2021-22

Type of NICs:

   

 Profit bands

Profits bands

Class 2 Flat rate

TBA £3.05

TBA

£6,515+ 

Class 4

0% 0%

TBA

Up to £9,568

Class 4

10.25% 9%

TBA

£9,500 to 50,000

Class 4

3.25% 2%

Above

TBA

Above £50,000

Notes:

* The 1.25% tax rise will apply to earnings/profits above the respective thresholds in future years, the government has not provided details of the earnings thresholds for 2022-23.

How will this affect me?

Examples:

Current NIC liabilities for employee and employer versus the increased liability post 6 April 2022, for a selection of employee earnings levels.

Earnings level

£12,570 p.a. 

 £50,000 p.a. £100,000 p.a.
Earnings between Primary Threshold £9,564 & Upper Earnings Limit £50,270 £3,006  £40,436 £40,706
Earnings above Upper Earnings Limit £50,270 - - £49,730
Rate of basic NICS 12% 13.25% 12% 13.25% 12% 13.25%
Liability above Primary Threshold  £361  £398 £4,852 £5,358 £4,884 £5,393
Rate of higher NICs         2% 3.25%
Liability above Upper Earnings Limit          £995 £1,616
Total employee NICs £361 £398 £4,852 £5,358 £5,879 £7,009
Total Additional Employee Contributions   £37   £506   £1,130

Employer contributions:

Earnings above Secondary Threshold £8,840 

£3,730  £41,160  £91,160
Rate of NICs 13.8% 15.05% 13.8% 15.05% 13.8% 15.05%
Employer's liability £515 £561 £5,680 £6,195 £12,580 £13,719
Total Additional Employer Contributions   £46   £515   £1,139

 

Self-employed individuals:

 Earnings level  £12,570 p.a. Basic Rate: £50,000 p.a. Higher Rate: £100,000 p.a.
Earnings between Lower Profit limit £9,568 & Upper Profit limit £50,270 £3,002 £40,432 £40,702
Earnings above Upper Profit limit - - £49,730
NICs basic rate 9% 10.25% 9% 10.25% 9% 10.25%
NICs Liability above Lower Profits Limits (£9,568) @ 9% / 10.25% £270   £308 £3,638  £4,144 £3,663  £4,172
NICs higher rate         2% 3.25%
NICs Liability above Upper Profits Limit (£50,270) @ 2% / 3.25%          £995 £1,616
Total NICs payable £270 £308 £3,638 £4,144 £4,658 £5,788
Total Additional Self-Employed Contributions   £38   £506   £1,130

 

Useful guides on this topic

National Insurance: Rates
National Insurances rates tables

External link:

Building Back Better: Our Plan for Health and Social Care


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