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Boris Johnson has unveiled a manifesto-busting tax raid to bail out the NHS and reform social care. It is estimated to generate £12 billion, making it the highest tax burden Britains have faced in peacetime. This is a very significant national insurance rise, even more so with it being outside of a budget. The 2021 March Budget raised the largest amount of taxes since 1993 and this is in addition to that.

Johnson has come under criticism for breaking promises. In the forward to the 2019 Conservative manifesto, he stipulated he would not raise the rate of income tax, VAT or National Insurance. Critics go on to say this isn’t the first time Johnson has broken a policy promise. Other examples include the foreign aid budget and commitments made to Northern Ireland.

To justify breaking a manifesto commitment Johnson commented, “this breaks a manifesto commitment, which is not something I do lightly but a global pandemic was in no-one’s manifesto.”

What is the National Insurance Rise?

The UK-wide tax change has been labelled the ‘Health and Social Care Levy’. National Insurance contributions (NICs) will increase by 1.25% from April 2022. The actual tax rise is effectively 2.5% with the direct burden on both employees and employers. From 2023, the health and social care levy will then be separated out and the exact amount people will pay will show on payslips.

The national insurance rise will be paid by all working adults, including people over the state pension age. For a basic rate taxpayer earning £24,100 this would mean an additional contribution of £180 per year. For a higher rate taxpayer earning £67,100 this would mean an additional £715 per year.

Who pays National Insurance?

The vast majority of workers in the UK pay National Insurance to fund different parts of the state benefits system. This ranges from state pensions, unemployment benefits and health and social care. The amount of National Insurance payable is linked to salary and type of employment.

Class 1: Employees with an annual salary greater than £9,550

12% on earning between £9,568 to £50,270 (NICs between £184 and £967)

Class 2: Self-Employed with profits over £6,515

Class 3: Voluntary Contributions (for the employed, self-employed and unemployed) with profits less than £6,515

Class 4: Self-Employed with profits over £9,569

NICs are more complicated if you’re self-employed. Self-employed will usually pay two contributions – class 2 and class 4. These contributions are paid on profits above a certain threshold, payable through self-assessment.

You can find more information about National Insurance contributions on gov.uk

If you would like advice on your tax affairs please contact us. Call us on 0800 471 4546 or you can contact us here