National Insurance is in essence a tax that is levied in order to entitle you towards state pension and state benefits. Like normal income tax it is paid on earnings above a certain point by employees, employers and those individuals that are self-employed.
Low earners, individuals that have taken a long period of time out of work for eligible reasons and people who do not work do not necessarily need to pay this tax but can make voluntary contributions in order to keep entitlement to receive state support and retirement incomes.
Changes to be implemented
‘Class 1’ Employees
Employees that pay ‘Class 1’ contributions at a rate of 12pc on earnings above £187 a week and an additional 2pc on earnings above £976 a week, will see their rates increased to 13.25pc and 3.25pc respectively.
‘Class 1A & 1B’ Employers
Employers are also expected to see a rise in National Insurance Contributions paid for their employees, from the current rate of 13.8pc to 15.05pc.
‘Class 2’ & ‘Class 4’ Self-Employed
Self employed individuals will pay either of Class 2 or Class 4 contributions. This will be dependent on how much is earned through self- employment. Class 2 contributions is paid on earnings in excess of £6,515 a year at a rate of £3.05 a week, whilst Class 4 contributions are paid on earnings in excess of £9,518 a year at 9pc and then 2pc on earnings above £50,270.
For Class 4 contributions the rates will rise to 10.5pc and 3.5pc respectively in April 2022.
‘Class 3’ Voluntary Contributions
The voluntary contribution rate is also expected to rise from £15.40 for the current 2021-22 tax year to £15.85 from April 2022 onwards.
The aforementioned rises in National Insurance Contributions is said to fund Health and Social Care and NHS deficits left across the U.K as a result of the Covid-19 pandemic.