23 March 2022
If you are covering the increase in national insurance thresholds, please see the following comment from Shaun Moore, tax and financial planning expert at Quilter:
“The Chancellor’s announcement is a national insurance U-turn in all but name. The increase in the primary threshold will mean that roughly 70% of national insurance payers will pay less NICs in 2022/23 than they did in 2021/22, according to the government’s own calculations.
“Anyone earning below £34,300 will now face a lower national insurance bill in 2022/23 than they currently face in this tax year. Anyone earning above this amount will still have a higher national insurance bill.
|
Salary |
2021/22 NICs |
2022/23 NICs pre-statement |
2022/23 NICs post-statement |
|
£20,000 |
£1,251.84 |
£1,340.90 |
£1,073.12 |
|
£30,000 |
£2,451.84 |
£2,665.90 |
£2,398.12 |
|
£40,000 |
£3,651.84 |
£3,990.90 |
£3,723.12 |
|
£50,000 |
£4,851.84 |
£5,315.90 |
£5,048.12 |
|
£80,000 |
£5,478.84 |
£6,317.90 |
£6,049.92 |
|
£100,000 |
£5,878.84 |
£6,967.90 |
£6,699.92 |
|
£120,000 |
£6,278.84 |
£7,617.90 |
£7,349.92 |
Source: Quilter (assumes primary threshold of £9,880 for April, May and June 2022 and £12,570 thereafter)
“This does of course mean that the national insurance primary threshold is tied to the personal allowance, which the Chancellor has already fixed until at least 2025/26 so these bandings will remain static for a while yet. The government announced that the primary threshold and lower profits limit will only increase in line with CPI from the 2026/27 tax year onwards.
“This means that the benefit to NICs payers will reduce over time as wage inflation pushes people into paying more, and is reflected by the fact the government estimate the cost to the exchequer to reduce from £6.2bn in 2022/23 to £4.3bn in 2025/26.
“It does also create administrative problems for employers who will have to start the tax year with one set of assumptions for national insurance calculations, to then have to change them from July.
“The Chancellor also announced a cut in the basic rate of income tax from 20% to 19% from April 2024, just in time for the next election. This will be of significant benefit to pensioners, who pay income tax on earnings and pension benefits, but do not pay any national insurance contributions.”
