On 6 April 2022 the national insurance rate increased by 1.25%. This meant that the deduction from an employee’s salary for national insurance contribution increased from 12% to 13.25%. However, from July 2022 most of us should see our national insurance deductions come back down.
From 6 July 2022 the national insurance threshold was increased. Previously you would pay national insurance on earnings over £9,880 per annum (2022/23), however from this date the threshold has been increased to bring it in line with the personal allowance (£12,570 in the 2022/23 tax year).
Increasing the threshold means that fewer employees will get caught by the deduction, and 70% of people that do exceed the threshold will be expected to be paying less national insurance overall. What about the remaining 30%? These are the higher earners. It is expected that these higher earners will be paying more national insurance than they were before the increase on 6 April 2022.
The increase in the threshold is expected to affect a lot of directors of companies in the UK. It has always been advantageous for directors to be on a low salary which they top up with dividends, while still paying national insurance to qualify for their national insurance credit.
On 7th September 2022, Liz Truss promised to reverse the 1.25% increase in national insurance contributions. There has been no mention of the threshold being reversed as of yet.