Most employees will now notice that their net pay has decreased this current tax year as the government raises National Insurance to help the NHS recover from the Covid pandemic and fund social care in England. It is a tricky situation for the Government as it has gone back on its 2019 election manifesto promise not to raise it.
The rate of National Insurance for employees, employers and the self-employed has gone up by 1.25%. But there is some good news, presumably to help mitigate the fall out of the broken promise, in the fact that from July the amount people can earn before they start paying National Insurance will be raised from £9,880 to £12,570.
The combined effect of both the raise in rate and the threshold means that anyone earning less than £34,000 per annum will pay less National Insurance over the year.
We can only presume the change in threshold is being delayed until July, not to make accountants lives more difficult, but to give time for computer software writers to be able to make the amendments.
Then it’s all change again next tax year on 6 April 2023 when the National Insurance rise is reversed. However, it is being replaced by a new Health and Social Care Levy currently set at 1.25%. The effect of this that employees over the state pension age (who currently don’t pay National Insurance) will pay the levy. The government says the extra money will initially go towards easing pressure on the NHS and then a proportion of it will be moved into the social care system, which is under pressure because of an ageing population and the pandemic.
Need help with your accounts and tax planning? Get in touch with Roger to see how he and his team can help.
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