What is National Insurance?
Paying National Insurance (NI) is mandatory as soon as you reach 16-years-old and you’re either an employee earning above £184 a week, or self-employed and taking home £6,515 or more a year.
Paying these contributions means that you will qualify for the state pension, as well as other benefits such as maternity allowance and bereavement support payments.
Why are the NI rates going up?
Starting from the 6th of April 2022, NI will increase by 1.25%.
With the pandemic having such a detrimental effect on the National Health Service, these additional payments will be spent on helping the NHS to recover, as well as funding the UK’s health and social care.
The changes are temporary, lasting for one year until the 5th April 2023, at which point the NI rates will go back to the previous rates but the increase will be shown separately on payslips as the ‘Health and Social Care Levy’.
It will affect those who pay the following NI contributions:
- Employer Class 1
- Employee Class 1
- Class 1A
- Class 1B
- Class 4
How will the NI changes affect umbrella company contractors?
These changes will have an impact on those employed by an umbrella company.
The main rate for employees is due to rise from 12% to 13.25%, and the amount you’ll be charged will all depend on how much you earn.