National Insurance Contributions can be a confusing for many. To help clear up any confusion they are paid into a fund, from which some state benefits are paid. This includes the state pension, statutory sick pay or maternity leave, or entitlement to additional unemployment benefits. Numerous factors determine the level and type of national insurance contributions an individual pays including employment status, age, level of earnings, and residence status.

However, changes made to the NIC thresholds for the tax year 2022/2023, have created problems for those on lower incomes. We break down the changes below.

What Are The Changes To National Insurance Contributions?

The Chancellor, Rishi Sunak, shocked many onlookers with his Budget Spring Statement on 23rd March 2022. This was through amending the thresholds where NICs is payable by individuals, for the NIC classes 1, 2 and 4.

The class 2 and 4 thresholds are aligned equally, whilst the income threshold for income tax will be achieved at the start of the 2023/24 tax year.

For 2022/23, self-employed individuals will only be required to pay class 2 and class 4 NIC on profits above £11,908. However as of the 2023/24 tax year, class 2 and 4 NIC will be payable on profits above £12,570 per year.

Although class 2 is not changing in July 2022, a new rule is being brought in that says if your earnings are between £6,725 and £12,570 you will get a credit for the Class 2 and you do not need to pay it.

These amendments have created headaches for lower income professionals as to whether or not to pay NIC on a voluntary basis.

If you require any further information on tax thresholds, amendments, or anything accounting related for that matter, please don’t hesitate to get in touch on 01992 642024.