Investing

National Insurance payments set to rise: how will this affect you? | MyWalletHero

Image source: Getty Images


National Insurance has been a hot topic in the last few weeks. According to multiple news outlets, the government is planning to hike National Insurance payments.

So, how much could payments rise by? And how could an increase affect you? Let’s take a look.

How much are National Insurance payments now?

National Insurance is the government’s second-biggest source of income after income tax.

It is used to pay for various state benefits, such as the State Pension and unemployment benefits. The amount you pay depends on your income and your employment status.

If you are employed, you pay National Insurance if you earn more than £184 a week (£787 a month). You will pay 12% on any earnings over this amount, up to £967 a week (£4,189 a month). You then pay 2% on anything over this amount.

The self-employed typically pay lower amounts of National Insurance.

How much will payments rise?

At the moment, the amount by which payments could increase has not been confirmed.

According to the Telegraph, Downing Street wants a 1% increase. However, the Treasury wants a bigger increase of 1.25%. The Times, meanwhile, reports that Sajid Javid, the Health Secretary, is pushing for a 2% increase.

The government intends to use the additional revenue to improve social care and reduce NHS waiting times.

How will a National Insurance hike affect me?

National Insurance is usually deducted from your income. So, any hike will leave you with less disposable income to spend every month.

According to calculations reported in The Sun, for example, someone earning an annual income of £10,000, currently pays about £52 a year in National Insurance. If rates went up by 1%, it would raise their payments to £56, an increase of £4.

For someone earning £15,000, a 1% hike would see their payments rise from £652 to £706 a year, an increase of £54. Someone earning £25,000 would see their payments go up from £1,852 to £2,006 a year, an increase of £154. People earning £50,000, meanwhile, would see their payments rise by a staggering £404 from £4,852 to £5,256 a year.

However, overall, it is thought that any potential hike would affect those on lower incomes the most. One reason is that wealthier earners are likely to have other sources of income that are not subject to National Insurance payments. Other high earners could also be self-employed and thus pay lower rates.

Additionally, since National Insurance is calculated on a weekly or monthly basis, seasonal workers or those on zero-hours contracts might have to pay despite their total income being less than the annual threshold.

How can I make up for any shortfall in my disposable income?

One way to make up for any potential shortfall in your disposable income is to ask for a pay rise from your employer. That way, if the National Insurance hike does happen, it will be offset by your salary bump. If you are not sure where to start, check out our guide on how to ask for a pay rise (and actually get it).

Earning extra money through a side hustle is another excellent way to increase your disposable income. Any income generated from a side hustle up to £1,000 per year qualifies for tax relief known as the trading allowance. Nowadays, there are a number of side hustles to choose from. Check out our article on side hustles you can do from home for some ideas.

Could you be rewarded for your everyday spending?

Rewards credit cards include schemes that reward you simply for using your credit card. When you spend money on a rewards card you could earn loyalty points, in-store vouchers airmiles, and more. MyWalletHero makes it easy for you to find a card that matches your spending habits so you can get the most value from your rewards.

Was this article helpful?

YesNo


Some offers on MyWalletHero are from our partners — it’s how we make money and keep this site going. But does that impact our ratings? Nope. Our commitment is to you. If a product isn’t any good, our rating will reflect that, or we won’t list it at all. Also, while we aim to feature the best products available, we do not review every product on the market. Learn more here. The statements above are The Motley Fool’s alone and have not been provided or endorsed by bank advertisers. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Barclays, Hargreaves Lansdown, HSBC Holdings, Lloyds Banking Group, Mastercard, and Tesco.



Most Related Links :
Business News Governmental News Finance News

Need Your Help Today. Your $1 can change life.

[charitable_donation_form campaign_id=57167]

Source link

Back to top button