How much is National Insurance? what is the threshold, how is NI calculated - and threshold increase explained
The National Insurance threshold will be increasing this July - here's everything you need to know about what this means for you.
Chancellor Rishi Sunak outlined a number of key measures in his Spring Statement to help ease the spiralling cost of living in the UK.
Among them is a an increase on the national insurance threshold which is hoped to give families an extra £330 per year.
Here's everything you need to know about the National Insurance threshold and how it will effect you.
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What is National Insurance?
National insurance is a tax on earnings paid by employees and employers, which pays for benefits provided by the state, such as pensions, jobseekers allowance, maternity pay and more.
How is National Insurance calculated?
National Insurance is calculated based on your earnings and whether you meet or exceed the current earnings threshold.
If you meet the threshold, these payments are mandatory and are taken from your wage each month.
National Insurance payments will go towards your state pension and entitle you to other benefits.
How much do I have to earn before paying national insurance in 2021/2022?
Currently if you earn over £9,586 or above you have to pay a National Insurance tax of 12%.
The rate was set to rise to £9,800 in April, but the Chancellor instead announced in the Spring Statement yesterday, this would be increased to £12,750.
How much do I have to earn before paying national insurance in 2022/2023?
You will not have to pay any national insurance tax unless you earn above the new threshold of £12,750.
This year's Spring Statement saw the Chancellor raise the National Insurance threshold by £3,000 to help those earning less have more money to combat the rising cost of living.
This new threshold will come into effect from July 2022.
Speaking to MPs during the Spring Statement, Rishi Sunak said,
“Our current plan is to increase the NICs threshold this year by £300, I’m not going to do that – I’m going to increase it by the full £3,000, delivering our promise to fully equalise the NICs and income tax thresholds."
“From this July, people will be able to earn £12,570 a year without paying a single penny of income tax or National Insurance.
He added: "A tax cut for employees worth over £330 a year."
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