The Prime Minister recently announced a 1.25% increase to National Insurance from April 2022. Here we explain what this change in rates means for small businesses and the self-employed.
Speaking at the beginning of September, Boris Johnson announced plans to increase National Insurance in April 2022. The increase of 1.25% is designed to fund the health and social care crisis following the pandemic.
How does this affect small businesses?
If you are an employer, the rate changes could make the process of hiring staff more expensive. Employers pay a percentage of Class 1 National Insurance for each employee, depending on how much they get paid. This could raise recruitment challenges.
If you are self-employed and a sole trader, the increased rates will be felt harder than most. Paying taxes through self-assessment means the rate is based on income after business expenses, so it directly affects how much salary you can pay yourself. You will pay Class 4 National Insurance contributions if your annual profit is more than £9,568 (2021/2022 tax year).
“We are fully aware that this increase in National Insurance will impact on the UK’s small business owners and sole traders. It couldn’t have come at a worse time when they are just starting to recover from the pandemic and revive their livelihoods.”
Samantha Heynes, Founder of Cloud Bookkeeping Warwick.
To keep up-to-date with national insurance rates and categories, visit gov.uk here.
If you would like to discuss how the rise in National Insurance could affect your small business or need any support with payroll, then please get in touch.