Who Pays National Insurance?

National Insurance (NI) is paid by employees, employers and the self-employed:

  • Employees pay NI on their wages
  • Employers also pay extra NI contributions for staff
  • The self-employed pay NI on their profits

What Is The Cut That Took Place On 6th July?

Starting from the 6th of July, the primary tax threshold (which is the main salary at which people begin paying National Insurance), rose from £823 to £1,048 a month. This means that earnings above £12,570 a year, which is the same threshold as 20% income tax, are now taxed at 13.25% National Insurance.

So Who Really Benefits From This Change?

Anyone on low-wage income who earn £12,569 a year will now not have to pay NI altogether. Sounds encouraging, and a great way to help this often overlooked sector of the workforce?

But this demographic are often also on Universal Credit, which has its own tax structure.

As a result, their £330 gain from this tax cut, will only actually amount to £148.50.

What About Those Above The £12,570 Income Threshold?

Those who earn £12,570 a year will save roughly £330 a year.

Those earning up to £40,000 will see some minor benefit of about £17 a year.

After the £40,000 threshold, however, National Insurance is increasing.

Here’s a snapshot of the impact at increasing salary thresholds from £20-£100k

£20,000 (£-178)

£30,000 (£-53)

£50,000 (+£197)

£80,000 (+£572)

£100,000 (+£822)

The Impact Of Inflation

Despite these changes, the tax cut is unlikely to be of any significant benefit to anyone, due to soaring inflation. Britain’s tax burden is due to reach 36.3% in 2026/27 which is the highest it’s been in 80 years. With inflation edging towards 10%, anything that is saved is very likely to be spent on bills, food and rent or mortgage.

These are certainly challenging times. For any advice on tax planning, please feel free to get in touch with us below.