Boris Johnson has announced a 1.25% increase in National Insurance contributions in an effort to reform the social care system, but just for one year from April 2022 until 2023.
What is National Insurance?
National Insurance is a mandatory payment by those over 16 who are earning more than £184 a week, or who are self-employed and making a profit of £6,515 or more a year.
The amount they pay is dependent on how much they earn. Individuals stop paying once they reach the state retirement age.
Why is the PM’s announcement a big deal?
There’s been widespread fury the proposal as it is a breach of a 2019 manifesto pledge and young working people will be expected to carry the brunt of the financial burden.
Pensioners do not have to pay National Insurance, even though more than half of social care costs go towards caring for those aged over 65, according to the King’s Fund think tank.
How will the salaries for under-65s, earning £50,000 or less, be affected?
For those earning between £9,500 and £50,000 a year, National Insurance contributions will increase to 13.25% (from 12%) of any earnings over £12,570.
If you earn £15,000
Current National Insurance is £652 per year
Future National Insurance will rise to £706 per year
If you earn £25,000
Current National Insurance is £1,852 per year
Future National Insurance will rise to £2,006 per year
If you earn £30,000
Current National Insurance is £2,451 per year
Future National Insurance will rise to £2,706 per year
If you earn £50,000
Current National Insurance is £4,851 per year
Future National Insurance will rise to £5,356 per year
How will the salaries for those under-65s and earning more than £50,000 be affected?
For salaries more than £50,000, only 2% of your earnings are paid into the National Insurance although the hike means this will increase to 3.25%.
There are reports Johnson will be placing a “cap” on the lifetime contributions made by earning individuals – meaning many believe it will unfairly affect lower-earners.
If you earn £80,000
Current National Insurance is £5,479 per year
Future National Insurance will rise to £6,359 per year
If you earn £100,000
Current National Insurance is £5,878 per year
Future National Insurance will rise to £7,008 per year
How will the salaries for those over 65 still earning be affected?
Anyone over the state pension age of 65 does not have to pay the mandatory National Insurance contributions, no matter how much they earn.
How will the salaries for those over 65 but not working be affected?
No-one pays National Insurance contributions on any payments from a pension scheme, including guaranteed income from an annuity.
