From April 2022, your take home pay will likely reduce because of a new tax called The Health and Social Care Levy. This is being done through an increase in National Insurance Contributions for the next tax year.
What this means is that if your salary stays the same from March to April 2022 that the amount of money you take home will reduce. Unfortunately there is nothing you can do to avoid this so it’s important to be prepared for this decrease in pay, especially when considering the increase in cost of living that’s also happening.
The National Insurance you pay is calculated in different bands, it’s not as simple as a certain percentage of your wages, with the rise of 1.25% applied to certain bands, so you won’t just see a deduction of 1.25%. This will also be a separate deduction from your wages from April 2023, so while that will mean the amount will stay the same it will be clearer as to what the deduction is for – people of state pension age will also only be affected by the increase from April 2023 rather than April 2022.
The quickest way to work this out is to look at your most recent payslip – if you see National Insurance deductions on it then you will probably be affected.
Those on a salary of £20,00 will pay an extra £89 per year, a £30,000 salary will mean you pay an extra £214 and a £50,000 salary will result in an increase of £464 per year.
No! Employed people pay Class 1 contributions, which are collected by your employer before you get paid so everything will be handled for you. Self employed pay Class 4 contributions, which will be automatically calculated when your self-assessment is completed for 2022/2023.
It would be understandable to be worried about an additional deduction from your wages when the cost of living is spiralling. The below links are for resources which might be able to help you with debt advice, answers to questions or to prepare a household budget.
www.moneyhelper.org.uk bring together three government backed financial guidance providers (the Money Advice Service, The Pension Advisory Service and Pension Wise) so are in a good place to help you find debt support and have a range of resources and tools available.
www.wearemoneysmart.com is a free to use financial wellbeing hub offering budget calculators, financial guidance and links to products and services to suit you.
www.moneydashboard.com is a free budgeting app that uses Open Banking to allow you to see all your accounts in one place, making it easy to see how much money you’ve got and where it is.