MILLIONS of workers are facing a tax hike in April that will cost them hundreds of pounds more each year.
The Prime Minister is promoting a plan to increase the National Insurance tax to 1.25 percentage points.
Here’s everything you need to know about tax increasewhen it happens and how it will affect your finances.
How does the National Insurance Rate change?
You pay national insurance when you are working and earning more than £9,568 a year or £184 a week.
Self-employed people earning more than £6,515 are also required to pay national insurance contributions.
The increase will affect the finances of around 25 million Brits, who will have to pay an additional 1.25 per cent points for donations.
This means the rate will increase from 12% on earnings between £184 and £967 a week to 13.5%.
Fees on earnings above this amount will increase by 1.5 percentage points from 2% to 3.5%.
How much more National Insurance will I have to pay?
The amount of National Insurance you pay depends on how much you earn, with higher earners paying more.
Currently, someone earning £15,000 a year pays a contribution of £652, while someone else earning an annual salary of £25,000 would be taxed £1,852 a year.
Figures from accountant Blick Rothenberg for The Sun show how these NICs will go up when the increase is introduced in April of this year.
For an income of £10,000, it will be £5 a year more, and for an income of £25,000, an extra £193.
National insurance pay for incomes of £35,000 will increase by £318 a year, and by £50,000, they will increase by £505.
The average salary in the UK is £29,900,
ABC Finance calculates that people on this salary will be forced to pay an extra £255 a year and £21.25 a month for National Insurance
The increase will likely hit those with lower incomes more heavily than the wealthier members of society, the accounting firm said.
That’s because contributions are calculated on a weekly or monthly basis, so seasonal workers or those with no-hours contracts may have to pay even though earnings are below the annual threshold.
National Insurance is not the same as income tax, and you Pay this separately on top of your earnings.
When will I start paying more National Insurance?
Boris Johnson said the tax increase will start from April 2022, when the new tax year begins.
Tax increases are usually announced in the Prime Minister’s annual Budget, such as when Rishi Sunak announced a 25% increase in corporate tax last March.
But the plan to increase National Insurance contributions first revealed by The Sun in July of last year.
National insurance rates last increased in 2011, rising from 11% and 1% to current levels of 12% and 2%.
The thresholds at which you pay per rate typically increase each year.
Why is National Insurance on the rise?
National Insurance contributions help fund benefits such as State Pension, sickness benefits and unemployment benefits.
Bump will aim to limit the cost of care – meaning pensioners won’t have to pay more than £86,000 and those with assets under £20,000 pay nothing.
Revealing his plans to the Commons, Mr Johnson said: “It would be irresponsible if you had to incur the costs of higher debt and higher debt.
“So from next April we will create a new health and social care tax in the UK of 1.25% on earned income, which is assumed in the healthcare and society with a correspondingly increased dividend rate.”
The announcement broke with Tory’s manifesto, which read: “We promise not to increase the rate of income tax, national insurance or VAT.”
Former Prime Minister John Major description move like “recession”.
“I don’t think they should use the national insurance contributions, I think it’s a regressive,” he said.
“I’d rather do it frankly and honestly and get it taxed.”
Meanwhile former prime minister Lord Hammond slam shut plan when it is announced.
He told Times Radio: “Economically, politically, it is a mistake to expand the state further to protect private property by asking the poor to subsidize the rich.”
To 700,000 self-employed people face higher tax billss under Boris Johnson’s social care reforms.
Those who are working in retirement will have to pay a new tax according to the plans too.
Meanwhile Council tax bills can also increase at the same time in a dual whale for households.
https://www.thesun.co.uk/money/16040354/national-insurance-increase-amount-rate-change/ How much more will I have to pay and when will the rate change?