From Wednesday, national insurance contributions will increase by 1.25 percentage points, breaking a manifesto promise from Boris Johnson to “not to raise the rates of income tax, national insurance or VAT”.

From April 2023 onwards, the NI rate will decrease back to the 2021-22 level, with a new 1.25% health and social care levy legally introduced.

The UK Government predicts that the tax rise will raise £39 billion over the next three years to help reduce the Covid-induced NHS backlog and later reform adult social care for the long-term.

As a result it means that everything you earn over the tax-free threshold was being taxed at 12% and will now be taxed at 13.25%.

When do you start paying national insurance?

On the Government website it says that individuals pay mandatory national insurance if you are 16 or over and are either:

  • an employee earning above £190 a week
  • self-employed and making a profit of £6,725 or more a year

The threshold for when national insurance comes out of your bank account is £9,880 of annual earnings, which is up by about £300 from March.

This will be raised again to £12,570 from July, which amounts to a tax cut of around £330 a year for workers, according to Chancellor Rishi Sunak.

As reported by Sky News, all workers will be worse off up until July, but then the impact of the higher threshold will actually take around two million lower earners out of the direct tax altogether.

Everyone earning under £32,000 a year will be better off - with one change cancelling out the other.

What did Boris Johnson say on the national insurance rise?

The Prime Minister said: “We must be there for our NHS in the same way that it is there for us.

“Covid led to the longest waiting lists we’ve ever seen, so we will deliver millions more scans, checks and operations in the biggest catch-up programme in the NHS’ history.

“We know this won’t be a quick fix, and we know that we can’t fix waiting lists without fixing social care.

“Our reforms will end the cruel lottery of spiralling and unpredictable care costs once and for all and bring the NHS and social care closer together.

“The levy is the necessary, fair and responsible next step, providing our health and care system with the long term funding it needs as we recover from the pandemic.”