National Insurance contributions increased

National Insurance contribution rates rose by 1.25 percentage points from April 2022, a change announced in September 2021 as a health and social care levy¹. The Resolution Foundation described the rise as "a precursor to the proper Health and Social Care Levy which will exist from 2023"². The increase applied to employee contributions, with employer contributions also rising³.

For an employee earning £30,000 a year, Class 1 National Insurance was £2,452 in 2021-22 and £2,665.90 in 2022-23, according to Which?¹. A self-employed worker with profits of £20,000 paid £1,097 in 2021-22 through a mix of Class 2 and Class 4 contributions, rising to £1,201.10 in 2022-23¹. The Resolution Foundation estimated the NI rate rise, excluding the effect of the threshold rise, would lower the average income of households in the bottom half of the distribution by around £140 (0.6 per cent), while those in the top half would lose £730 (1.2 per cent)².

The rise formed part of a wider set of April 2022 changes. State pensions increased by 3.1 per cent on 6 April 2022¹, and the National Living Wage rose from £8.91 to £9.50 an hour for workers aged 23 and over¹. The Resolution Foundation put the combined overnight rise in taxes and energy bills at an average of £1,200 a year per household in April². UK Finance noted that "April will see the 1.25 percentage point rise in National Insurance contributions" alongside "an expected 54 per cent rise in gas and electricity bills for the typical household following the revision to Ofgem's energy price cap"⁴.

The Work and Pensions Committee, in a report published on 30 September 2022, listed "the increase in National Insurance contributions from April 2022" among the changes affecting savers, and noted that "the Government had frozen the lower earnings threshold in 2022/23"⁵.

Why it matters for households

The NI rise reduced take-home pay for employees and increased costs for employers from April 2022¹. For the self-employed, the change affected Class 2 and Class 4 contributions¹. The Resolution Foundation estimated the combined effect of the NI rise and the Income Tax threshold freeze, which also began in April, at an average of £600 per household, or 1.4 per cent of disposable income². UK Finance said payments were "likely to come under greater pressure through 2022 as the cost-of-living squeeze weighs more heavily"⁴. The Work and Pensions Committee noted that the lower earnings threshold was frozen in 2022/23⁵.

What happens next

The Health and Social Care Levy was due to exist as a separate charge from 2023². The Work and Pensions Committee's report of 30 September 2022 gave the Government two months to respond to its recommendations⁵.