National Insurance contribution levels change in July

National Insurance contribution levels change in July

Since the government announced the further changes to the National Insurance contribution levels (NICs) back in their Spring Statement in March, the levels are finally coming into fruition this month (July).

It will mean that for 30m people they should save around £330 each and see a larger paycheque this month compared to last month.

Donna Gibson, Managing Director for Velocity Accounting Solutions comments: “The changes to the NIC levels will be met with a warm welcome by many people, especially during the cost of living crisis.

“The amount you can earn before you start paying National Insurance will increase from 6 July 2022, which means the amount of overall tax – since NICs is a tax in all but name – will reduce.”

What are the new thresholds?

The threshold for Class 1 NICs, which are paid by those who are employed, and Class 4 NICs, which are paid by the self-employed, rises from £9,880 to £12,570.

The new NICs threshold is now in line with the starting point for income tax, but the NICs rate UK taxpayers will pay has not changed and still includes the 1.25% addition for the Health and Social Care Levy made earlier this year.

Donna adds: “What these new thresholds mean is that you can earn an additional £2,690 before you need to start paying National Insurance. Everything you earn between £12,570 and £50,270 will be charged at the current higher NICs level of 13.25%, and anything above this higher threshold will be charged at 3.25%.”

“The additional savings we will see in our pockets thanks to this change will help considerably with the cost-of-living crisis. In fact, along with the council tax rebate, energy bills assistance worth at least £400 and support for the most vulnerable households of at least £1,200, this should go some way to easing the problems associated with the current high inflation.”

How much will you save?

If you want to find out how much more money you will have in your pocket thanks to the change in the NICs thresholds, the Government has created a handy calculator that you can use to determine what you will save on the Gov.uk website. But if you are self-employed, this calculator will not work for you, so you are best to contact your accountant to find out what the change means for you.

If you are an employer, employee or self-employed, and want to know more about how the NICs changes affect you and what you can expect to pay, then the team at Velocity Accounting Solutions are here to help on 0114 213 4731 or [email protected].