What is the national insurance limit? The tax explained and if the threshold will rise in the 2022 spring inventory

National insurance contributes to benefits and pensions that cover everything from unemployment benefits to maternity leave.

The amount you pay depends on your employment status and earnings, while companies must also contribute to National Insurance.

Here is how the national insurance threshold worksand What to expect from 2022 spring declaration this week.

Chancellor Rishi Sunak holds the budget box while posing with his finance team (Credit REUTERS)

What is the limit for national insurance?

For 2021-2022, the “Class 1” national insurance threshold is £ 9,568 per year. If you earn less than this amount, you do not have to pay contributions to the National Insurance.

Rishi Sunak, the chancellor has previously announced that national insurance would be increased by 1.25 percentage points in April 2022 to help fund the care sector. This is expected to have disproportionate consequences for people in lower grades.

Under this increase to national insurance, workers with a salary of £ 20,000 will pay an additional £ 130 a year

The Resolution Foundation has proposed that the proposed increase be postponed after April 2022.

But if this is not possible, it has also suggested raising the threshold from £ 9,568 to £ 12,500 to help tackle rising cost of living across the UK.

Currently, people pay compulsory national insurance if they are over 16 and are:

  • An employee earning over £ 184 a week
  • Self-employed and with a profit of £ 6,515 or more per year

Does the national insurance increase in the spring statement?

There has been hope that Mr Sunak could stay on the previously announced national insurance increase when he delivers his spring statement.

But the chancellor and Boris Johnson have both previously been adamant that an increase would not be delayed as the extra cash would be used to fund the NHS and the care sector.

Boris Johnson said in January: “The NHS has done a fantastic job, but it has been under terrible strain.

“Listen to what I say: we need to put that money in. We need to make that investment in our NHS.

“What I’m telling people is that if you want to fund our fantastic NHS, we have to pay for it – and this government is determined to do that.”

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Instead of canceling the increase or changing the threshold for national insurance, the Chancellor could decide to proceed with the increase, but offset it with a reduction in income tax.

However, this would create outrage among business leaders, with companies having to match employees’ national insurance payments.

Resolution Foundation chief economist Adam Corlett said, “Raising the national insurance threshold would be the best way, as it is well-targeted at middle-income households.”

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