Category: National Insurance

It is important to bear in mind that the 1.25% increase in National Insurance contributions (NICs) for 2022-23 will apply to National Insurance Class 1 and Class 4 contributions from April 2022. This means that the increase will apply to Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) NICs. Those above State Pension Age are not impacted by the April 2022 changes although see closing comments on the new Levy from April 2023.

Smaller employers who benefit from the NIC employment allowance may not be affected by the increase in employer secondary Class 1 contributions if their NI bill is covered by the allowance. The employment allowance currently allows eligible employers to reduce their National Insurance liability by up to £4,000 per year. The allowance is only available to employers that have employer NIC liabilities of under £100,000 in the previous tax year.

The employment allowance cannot be used against Class 1A or Class 1B NICs liabilities and accordingly, the 1.25% increase will represent a real cost even for small employers whose Class 1 NIC bill is covered by the employment allowance.

From April 2023, these increases will be incorporated into a new ringfenced Health and Social Care Levy of 1.25%. The levy will apply to those who pay Class 1 (employee and employer), Class 1A and 1B and Class 4 (self-employed) NICs and will also be extended to those over State Pension age who are in work. The NIC rates will revert to their current level, but the increase will of course remain by way of the new levy.

If you have lost or forgotten your National Insurance number you should try and locate the number on paperwork such as your tax return, payslip or P60. You can also login to your personal tax account to view, download, print, save or share a letter with your National Insurance number. 

If you do not already have a National Insurance number then you will normally need to apply for one if you are planning to work in the UK, claim benefits, apply for a student loan or pay Class 3 voluntary National Insurance contributions. You can apply for a National Insurance number if you live in the UK and have the right to work.

The Department for Work and Pensions (DWP) have launched a new National Insurance number application digital service which allows individuals to apply directly for a National Insurance number. An initial application should be made online and applicants will be advised if they need to book a face-to-face appointment. Applications are currently taking up to 16 weeks to be processed.

There are two types of National Insurance contributions (NICs) payable by the self-employed. These are known as Class 2 NICs and Class 4 NICs.

Class 2 NICs are paid by all self-employed taxpayers unless they earn under the Small Profits Threshold (SPT), currently £6,515, which remove the necessity to pay NICs. Class 2 NICs are currently payable at a flat weekly rate of £3.05 for the current 2021-22 tax year. Class 2 NICs count towards payments such as the basic State Pension, the employment and support allowance, maternity allowance and bereavement benefits.

The self-employed are required to pay Class 4 NICs (as well as to Class 2 NICs) if their profits are £9,569 or more a year. Class 4 NIC rates for the tax year 2021-22 are 9% for chargeable profits between £9,569 and £50,270 plus 2% on any profits over £50,270.

There is a specific list of jobs where class 2 NICs are not payable. These are:

• examiners, moderators, invigilators and people who set exam questions
• people who run businesses involving land or property
• ministers of religion who do not receive a salary or stipend
• people who make investments for themselves or others – but not as a business and without getting a fee or commission

If you fall within any of these categories it can be beneficial to get a State Pension forecast and examine whether voluntary Class 2 NICs should be made to make up missing years contributions.