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6th of July National Insurance Threshold Changes

You may remember back in March 2022 that the Conservative Government decided against abolishing or delaying the Health and Social care 1.25% rise in National Insurance Contributions (NIC) which began in April 2022, and instead Rishi Sunak announced an increase to the primary threshold of NIC to help with the cost-of-living crisis.

From July 2022 the primary threshold and lower profits limit (for the self-employed) will increase from £9,880 to £12,570 in line with the personal allowance. Both the NICs threshold and the personal allowance will remain at these levels until April 2026. You may therefore notice a change in your net take-home with the change taking effect this month.

Despite the increase of 1.25%, the higher threshold will mean that you take home more in net salary.

2021/22

2022/23

Salary

£20,000

£20,000

Income Tax

£1,486

£1,486

Employee NIC

£1,252

£1,072

Net Salary

£17,262

£17,442

Disclaimer: The figures in the example are purely illustrative and do not constitute a form of tax planning. These figures are based on a standard tax code of 1257L.

Back in April 2022 Class 2 NIC weekly contributions increased from £3.05 to £3.15. From April, self-employed individuals with profits between the Small Profits Threshold (£6,725) and Lower Profits Limit (£9,880 pro-rata to 5th July, £12,570 pro-rata from 6th July) will not pay class 2 NICs, meaning lower-earning self-employed people can keep more of what they earn while continuing to build up National Insurance credits. Note a change in the thresholds taking effect from the 6th July 2022.

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