The government web page which explains planned increases to National Insurance, states that contributions will increase by 1.25% from April. In fact, the rise is a 1.25 percentage point increase applied to existing National Insurance rates, not a percentage increase on those rates.
This might sound pedantic, but it does make quite a big difference to the figures.
From April, the government plans to increase the current rate for National Insurance contributions by 1.25 percentage points to go towards funding health and social care. For people currently paying National Insurance at a rate of 12%, this would mean they start to pay at 13.25% instead.
However, the government’s National Insurance web page states: “From 6 April 2022 to 5 April 2023 National Insurance contributions will increase by 1.25%”.
Consumer journalist Martin Lewis has also highlighted this on Twitter.
Most people will see a 10% increase in the amount of National Insurance they pay after the rise.
We have found 10 examples of this across government web pages, for example here and here.
As we’ve explained before, if something rises by 1.25% it means it gets 1.25% higher, which could mean a relatively small change. For example, a tax bill of £1,000 would become £1,012.50 if it rose by 1.25%.
However, a tax rate is itself a percentage, and percentages are often said to rise by percentage points—meaning how many steps it rises up the percentage scale.
This could mean a much bigger increase in cash terms. For example, if your tax bill was £1,000 at 12%, a tax of 13.25% (adding the 1.25 percentage point increase) would leave you with an updated payment of £1,104.17.
Image courtesy of Images_of_Money, licensed under CC BY 2.0