How much could the National Insurance increase cost you and what is the government's plan?
The government has announced plans to raise National Insurance rates as part of its plan to pay for social care, in a move which is hoped to raise £600m.
The so-called "health and social care levy" will raise money from anyone in work earning over £9,568, and has already proved deeply controversial.
The rise will cost most employees hundreds of pounds per year, and could mean a suspension of the ‘triple lock’ on pensions, which ensures pensions payments aren’t overtaken by the cost of living.
There’s some disquiet among Conservative MPs about the proposed rise, as the party’s 2019 manifesto explicitly stated there would be no tax or National Insurance rises to pay for social care. Labour has also said that it will oppose any National Insurance rise.
How much could the National Insurance increase cost you?
Prime Minister Boris Johnson confirmed that his government plans to raise National Insurance contributions by 1.25% from next April, as part of a £12bn package of tax increases.
Currently, workers pay 12% on earnings between £9,568 and £50,270 each year, and 2% on earnings over £50,270.
Here’s how much that 1.25% increase could change what different salary levels have to pay:
£20,000 – extra £130 paid per year
£30,000 – extra £255 paid per year
£50,000 – extra £505 paid per year
£80,000 – extra £880 paid per year
What is the government's National Insurance plan?
The social care system, which provides assistance to older people and people of working age with disabilities, is accepted as being in need of reform by parties across the political spectrum.
The Conservative government plans to raise money by increasing National Insurance contributions – which it refers to as the "health and social care levy" – which would also be paid by pensioners in work, despite them being exempt from National Insurance contributions.
What is National Insurance?
You pay National Insurance on everything you earn, and it helps you qualify for state benefits and a state pension.
It’s mandatory for all workers aged 16 and over who are earning more than £184 a week, and for self-employed people who make a profit of more than £6,515 in a year.
Once you hit the age where you can draw a state pension – which is gradually increasing from 65 and will reach 67 by 2028 – you don’t need to keep paying National Insurance.