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National Insurance: how much more will you be paying?

National Insurance: how much more will you be paying?
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From 6 April 2022, National Insurance contributions (NICs) will rise by 1.25%. But what does this mean for your personal finances? Here’s what you should know.

What is National Insurance?

National Insurance is simply a tax you pay on your earnings. It’s used by the government to pay for things like State Pensions and certain social benefits. 

Why are NI contributions going up? Well, the rates are increasing because the government is trying to fund the NHS and help more people access social care. The extra revenue generated from NICs will help with this. 

To be clear, National Insurance is not the same as Income Tax, which is another type of tax you pay on your earnings or income. Income Tax thresholds and rates didn’t change in the Autumn Budget – they’re frozen for now.

How much more will you pay in National Insurance?

Well, it depends on how much you earn, and whether you’re employed or self-employed. 


Employed people pay Class 1 NICs if they earn over £9,568 each year. So, right now, if you’re employed, you will only pay NICs if you earn more than the threshold. You pay 12% on your earnings between £9,568 and £50,270, and 2% on earnings over £50,270. 

How will things change? Well, from April 2022, you’ll pay an extra 1.25% on your earnings. So, you’ll pay 13.25% on any earnings between £9,568 and £50,270 and 3.25% on earnings over £50,270.


Right now, self-employed individuals pay:

  • Class 2 NICs if they earn more than £6,515 a year 
  • Class 4 NICs if they’re earning more than £9,569 a year 

The new 1.25% levy affects the self-employed, too, so whether you’re a freelancer or small business owner earning above the thresholds, you will pay more in National Insurance from April 2022. 

What does the rate increase mean for my finances?

The National Insurance increase can, of course, affect your personal finances. So, here are some quick tips for managing your money in light of the changes.

If you’re self-employed, start budgeting for the changes now so you’re not caught out when it’s time to file your tax return.  

Are you employed? You could go for salary sacrifice, which lets you pay more towards your pension in exchange for a lower salary. How does this help? Well, in short, you’re technically earning less, so your NI contributions go down as a result. 

Do you fall under the National Insurance threshold? It might be worth paying voluntary NICs to close any gaps in your National Insurance record. Otherwise, you might find it harder to secure a state pension down the line. 

This one applies to everyone, regardless of employment status: if you can afford it, start an emergency fund and put money away each week. As the cost of living is expected to increase over the coming months, it’s a good idea to have money in the bank for a rainy day. 

National Insurance: takeaway

Since the National Insurance increase doesn’t come into play until April 2022, there’s still time to prepare. So, start thinking about ways you might boost your income in the meantime. You can also contact Citizens Advice to find out what financial help might be available.  

Please note that tax treatment depends on your individual circumstances and may be subject to change in the future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

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