THE burden of tax falling on workers and employers has increased as a hotly-debated rise in National Insurance payments takes effect.

Employees, businesses and the self-employed will pay an extra 1.25p in the pound. The extra tax is earmarked for government spending on social care.

Some MPs opposed the move amid cost of living pressures, but mitigation will instead be introduced in July.

Experts are urging people to check their status as a new tax year starts.

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.

Employees pay National Insurance on their wages, employers pay extra contributions for staff, and the self-employed pay it on their profits.
In September, the government announced the rise in contributions from 6 April, in part to help ease the burden on the NHS.

It means that, instead of paying National Insurance contributions of 12% on earnings up to £50,270 and 2% on anything above that, employees will now pay 13.25% and 3.25% respectively. The self-employed will see equivalent rates go up from 9% and 2% to 10.25% and 3.25%.

Those of state pension age do not pay the tax at present, and nor do those on very low incomes.

After the announcement last year, the plans were met with disapproval from opposition parties and some backbench Conservative MPs who criticised the timing, as many people face sharp rises in energy bills and prices in general.

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

Taken together, the measures mean that, over the next 12 months, anyone earning less than about £34,000 a year will pay less in National Insurance than they did the previous year, while those earning more will see their payments rise.

Had the chancellor stuck with his original plan, then all but the very lowest income workers would have paid more in National Insurance.

Many employers will still pay more, and business groups have warned that this may be passed on in higher prices. They also said it would add to the pressures already faced by firms following the withdrawal of Covid support measures.