The Hollies Logo

Bookkeeping and Accounting Services In Shropshire

Call 01743 790086 Email

National insurance threshold increase explained

National insurance threshold increase explained

The income threshold at which people have to start paying national insurance has increased by £3,000 this July.

This means the threshold will increase to £12,570.

What is National Insurance?

It’s tax which helps pay towards benefits and pensions, covering everything from job seekers allowance to maternity leave payments for people in the UK.

What you contribute depends on your employment status and earning and businesses have to contribute towards NI too.

The income threshold at which people have to start paying national insurance increased this month.

What is the national insurance threshold increase?

For 2021- 2022, the “Class 1” national insurance threshold is currently £9,568 a year.

If you earn less than this amount, you won’t have to make national insurance contributions.

The income threshold at which people have to start paying national insurance will be increased by £3,000 to £12,570, as announced by the former chancellor, Rishi Sunak back in March.

The change, which came into effect on 6 July, means 30 million people will pay less tax, according to Mr Sunak.

The threshold had already been due to increase from £9,568 to £9,880 on 6 April 2022.

Mr Sunak’s announcement meant a further £2,690 lift, saving £267 over the next financial year.

By increasing the threshold, the Chancellor said around 70 per cent of workers will have their tax cut by more than the increase which came into force in April (a 1.25 per cent hike in national insurance.)

A £6bn tax cut for 30 million people

Speaking during the Spring Statement announcement, Mr Sunak said: “From this July, people will be able to earn £12,570 a year without paying a single penny of income tax or National Insurance.

“That’s a £6bn personal tax cut for 30 million people across the United Kingdom. A tax cut for employees worth over £330 a year.”

He added: “The largest increase in a basic rate threshold ever, and the largest single personal tax cut in a decade.”

Paul Johnson, director of the Institute for Fiscal Studies (IFS), said the £3,000 increase to the threshold would “more than compensate about 70 per cent of workers”.

The Government announced the national insurance increase in September to help fund the NHS and a new health and social care levy.

This includes the provision of care homes and personal care for those with disabilities or additional needs.

For more advice on this and what it means for you personally, or your business, or for help with everything from Self-Assessments, Limited Company Accounts and Corporation Tax returns contact The Hollies Bookkeeping on 01743 790086 or

Photo by Klara Kulikova on Unsplash