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Who will pay less tax this month? The NI threshold change

06/07/2022

Author: Dionne Dury

Employment, Legal Updates

National Insurance: How much tax you will pay after changes come into force from July

The National Insurance (NI) threshold is being increased, taking effect from today, (6 July). According to HM Treasury, around 30 million people will see their NI contributions reduce and their take-home pay increase. A much welcome change for the many struggling with the rising cost of living. But what do the changes mean? Will you be paying less tax this month? In this article, our expert employment solicitor, Dionne Dury, outlines what to expect.

What is National Insurance?

National Insurance is a payment made to qualify for certain benefits i.e. Maternity, Employment and Support Allowance and a state pension. It is paid if the person is 16 or older and either an employee earning above £190 a week or self-employed and making a profit of £6,725 or more a year.

What are the new National Insurance thresholds?

The income threshold for paying NI will rise from £9,880 to £12,570, meaning a lower proportion of people's salaries will be subject to it and around 2 million people will be exempt from paying it altogether.

The primary threshold will increase for employees:

  • Weekly - from £190 up to £242
  • Monthly - from £823 up to £1,048

For self-employed people, the increase includes:

  • Small profits - from £6,515 up to £6,725
  • Rate per week - from £3.05 to £3.15
  • Lower profits - from £9,568 up to £11,908

Why are the changes to national insurance happening now?

It has been a turbulent time for National Insurance contributions over the last 12 months. In September 2021, the Prime Minister announced a 1.25 per cent rise; a one-year levy to fund health and social care in the UK. Introduced in April this year, the hike coincided with the war in Ukraine and rising fuel, energy and food bills. The change to the threshold will reverse the impact of the levy on anyone earning less than around £35,000. They will see their pay packet return to where it was before April.

How will my contributions change?

Salary

Monthly NI Pre-April

Monthly NI 1.25% increase

Monthly NI Post-July

Change

£20,000

£104.32

£111.74

£82.04

-21%

£30,000

£204.32

£222.16

£192.46

-5.8%

£40,000

£304.32

£332.58

£302.87

-0.04%

£50,000

£404.32

£442.99

£413.29

+2.2%

£60,000

£423.24

£472.33

£442.62

+4.6%

You can check how the National Insurance contributions changes will affect you. Visit the Gov tool to get an estimate of how the changes to National Insurance contributions will affect you.

What to do next?

If you have any concerns regarding your employer’s handling of the changes or require further advice or assistance on any of the matters raised in this article you can contact our solicitors in Norwich. Dionne Dury, on 01603 660811 or via email at dionnedury@hatchbrenner.co.uk.

Dionne Dury Employment Law

Employment specialist solicitor and workplace mediator

If you would like further information about any service, call us on 01603 214220