Last week, the prime minister announced that National Insurance contributions will increase by 1.25% from April 2022. The aim of the increase is to address the funding crisis in the health and social care system.
To help the NHS and to fund plans to reform social care, a new Health and Social Care Levy is being introduced. This is part of a government pledge to invest £36 million over the next three years to aid recovery and reform the adult social care system so that people no longer face catastrophic care costs.
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How the National Insurance rise will affect the average Brit
According to Gary Hemming, commercial lending director at ABC Finance, the average salary in the UK is £29,900, and the average worker will be significantly impacted by the rise.
He explains: “Those on this wage will be forced to pay an increase of £373.75 a year and £31.15 a month in National Insurance after the Prime Minister announced a 1.25% increase to pay for social care in England. This 1.25% increase may look small to some but it will make a huge difference to the life of many.”
For many, the National Insurance rise could result in tighter home finances. The average UK household spends £8.34 a day on food (£253 a month) and £7.50 a day on rent (£227.50 a month). They also spend £3.21 on electricity and gas (£97.37 a month) and £3.19 a day on petrol and other fuels (£96.76 a month). They spend a further £2.67 a day on clothes (£80.99 a month).
What does the rise look like in practical expenses?
When you calculate how many days worth of essentials you’re missing out on after the increase, the results are surprising. At £8.34 a day on food, the yearly National Insurance increase will cost you the equivalent of 45 days of food.
Based on the national average, the National Insurance rise is also equivalent to 50 days of rent, 116 days of electricity and gas, or 117 days of petrol and other fuels.
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Reducing your bills to account for the National Insurance increase
If you know your finances will be tight following the rise, you can prepare by considering ways to reduce household bills. The easiest step to take is to call all your providers. Companies want to keep your custom, so they may be open to offering a discount to ensure you don’t cancel.
There are other ways to offset the rise in National Insurance. You could try reducing the cost of your subscription TV packages and your mobile phone contract. You could also find out whether switching to a water meter can reduce your bill. The worst that can happen is they’ll say no. If a discount isn’t possible, ask providers if they have a cheaper package that still meets your needs.
Look beyond the most obvious ways to make up for the National Insurance increase. For example, there are tax-free childcare discounts available for families. It’s worth finding out whether you qualify. And if your bank charges monthly fees for your current account, look into switching or put some of your money into a cash ISA instead.
