Spring Statement 2022 - National Insurance Contributions
Posted on: March 23rd 2022 · read
Announced today, the Chancellor saw fit to reduce national insurance for around 70% of workers by increasing the thresholds at which workers begin to pay national insurance, known as the ‘Primary Threshold’. The increase from £9,880 per year to £12,570, to be in-line with the personal allowance, will mean that those on the lowest incomes will benefit, potentially taking some workers out of any national insurance contributions liabilities.
However, the threshold increase will not take effect from 6 April 2022, but will instead apply from 6 July 2022. Therefore, there will be an average annualised threshold for the 2022/23 tax year of £11,908.
So, how does this affect workers?
For all worker’s earning anywhere between £11,908 - £50,268 per annum, they will see a decrease in their national insurance contributions of around £22 per month (£256 per annum).
From the 6 April 2023, when the threshold will be in place for a full tax year, workers in this bracket will see savings of around £356 per annum.
The Chancellor also announced an increase in the threshold for Class 2 NIC paid by the self-employed. Previously this was payable if profits exceeded the small profits threshold (£6,725) but from April 2022 Class 2 will become payable when profits exceed the lower profits limit (£9,880 until June 2022, then £12,570 – annualised at £11,908). The Government believe this will benefit around half a million self-employed people by up to £165 per year.
A reminder about national living wage / national minimum wage
The national living wage will see a 6.6% rise from 1 April 2022. The new rate will increase by £0.59 per hour above the current rate to £9.50 per hour. The national living wage is the statutory minimum wage payable to workers aged 23 and over. For a fulltime worker, this will equate to a pay rise of over £1,100 per annum.
The national minimum wage, payable to those under the age of 23, will also see above-inflation increases. The new rates payable from 1 April 2022 are:
|National Minimum Wage||Rate from April 2022||Current Rate (April 2021)||% Increase|
|21-22 Year Olds||£9.18||£6.83||9.8%|
|18-20 Year Olds||£6.83||£6.56||4.1%|
|16-17 Year Olds||£4.81||£4.62||4.1%|
This article is a part of our dedicated Spring Forecast Statement hub. For more analysis and insight, please click here.