Rise in National Insurance payments takes effect

The burden of tax falling on workers and employers has increased as of 6 April, as the hotly-debated rise in National Insurance payments takes effect.

Earmarked for government spending on social care, employees, businesses and the self-employed will pay an extra 1.25p in the pound. The earnings levels at which people start to pay income tax have been frozen, increasing the chances of employees being dragged into a new band - with a higher rate of tax - if they receive a pay rise.

The move, first announced in September 2021, means that instead of paying National Insurance contributions of 12 per cent on earnings up to £50,270 and two per cent on anything above that, employees will now pay 13.25 per cent and 3.25 per cent respectively. The self-employed will see equivalent rates go up from nine per cent and two per cent to 10.25 per cent and 3.25 per cent.

In the Spring Statement, Chancellor Rishi Sunak discussed plans to allow workers and the self-employed to earn more before they start making National Insurance payments. This will take effect in July.

An increase in the tax on dividends is also coming into effect, to add to the funds channelled by the government into the NHS and social care.