Many people will be listening out for news about national insurance tomorrow (Credits: Getty Images)
If Rachel Reeves decides to raise employers’ national insurance contributions in her first Budget tomorrow, it’s likely to be one of the most controversial measures.
While it would to raise a significant chunk of cash for the Treasury, there are plenty of figures criticising the decision – from Tories to small business owners to charities.
It would also raise questions about whether Labour has broken a pledge in its manifesto not to raise national insurance.
Sir Keir Starmer and his ministers have argued that they only ever promised not to raise taxes on ‘working people’, suggesting that this applied to employees rather than employers.
But Paul Johnson, the director of think tank the Institute for Fiscal Studies (IFS), has said the increase in employer national insurance contributions (NICs) will inevitably affect employees too.
How much National Insurance do you currently pay?
That depends on a lot of things, including whether you are an employee, an employer, or self-employed.
First of all, there are four classes that decide what your contributions count towards. Most people are in Class 1, which is for employees, and Classes 2 and 4 are for self-employed people. Class 3 applies to voluntary contributions.
To complicate things further, there are 16 different categories within Class 1 to decide who pays what, each designated a different letter of the alphabet.
Rachel Reeves could be preparing to target NICs (Picture: Stefan Rousseau/PA Wire)
Let’s first look at NI for employees, which Labour has said it will not change.
You don’t pay national insurance until you’re earning £1,048 a month, and everything above that is taxed at either 2% or 8% for most people.
As for employers – before this Budget, they paid either nothing or 13.8% towards their workers’ NI. But there’s a strong chance this may change.
What is national insurance?
National insurance (NI) is essentially a tax on everything you earn, or the profits you make if you’re self-employed.
Paying it means you qualify for certain benefits, which include the State Pension, Maternity Allowance and Jobseeker’s Allowance if you find yourself out of work.
Which of these pensions and benefits you qualify for depends on the class you fall into – find out more here.
How much is it rising by?
We don’t yet know how much employer NICs will rise tomorrow – in fact, we don’t know for certain whether they’ll rise at all as the government has never officially confirmed the speculation.
However, the Guardian has reported that Reeves is probably going to increase the contributions by up to 2% and may also lower the threshold where employers start paying NI.
It’s thought that the changes could raise around £20 billion for the Treasury.
How to find your national insurance number
You need an NI number to do several important things, such as find employment.
Usually you get sent one shortly before your 16th birthday.
It can be found on official employment documents, such as a P60, payslips or letters about benefits.
Alternatively, you can find …read more
Source:: Metro
