Employees do not pay 12% in National Insurance

18 March 2024
What was claimed

UK employees pay 20% of anything over £12,570 a year in income tax.

Our verdict

Not quite. Employees in the UK do not pay income tax on earnings up to £12,570. In England, Wales and Northern Ireland, employees who earn between £12,571 and £50,270 pay 20% tax, but those who earn over £50,271 are taxed more on their earnings above this threshold. In Scotland, workers pay 19% income tax on earnings between £12,571 and £14,732, but pay higher rates of tax on earnings above this threshold.

What was claimed

Employees pay 12% of anything over £9,500 a year in National Insurance.

Our verdict

Incorrect. Employees start paying National Insurance on earnings above £12,576 a year. This is currently 10% on earnings up to £50,268 a year. Anyone earning more than this pays 2% on earnings above this threshold.

What was claimed

By law employers need to take 8% of an employee’s salary to put into their pension.

Our verdict

Employers have a legal obligation to automatically enrol employees into a workplace pension if they meet certain criteria. However, employees can opt out of this at any time.

A video posted on various social media platforms, including Facebook, Instagram and TikTok, makes several claims about taxes paid by employees in the UK. The Facebook account, NDAinternet, claims that people in the UK pay 20% “of anything over £12,570 per year” in income tax and that National Insurance payments are “12% of anything over £9,500 a year”. 

The video is in the form of a dialogue between an employee and their boss, both of which are represented by the same man. The employee asks his boss why his pay is only £2,400, when his monthly salary is £3,000, and the boss explains that income tax, National Insurance and pension contributions have been deducted from the salary before the employee is paid. 

However, the video uses outdated figures while explaining how National Insurance payments work. National Insurance is currently 10%, and employees pay it once their earnings meet the primary threshold of £1,048 a month, or £12,576 a year

The claim about income tax is missing some context, as some workers pay more than 20% tax on earnings above the higher rate threshold, while the video also fails to mention that workplace pension schemes are optional for the employee. 

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How much income tax do people pay? 

The video claims: “For your income tax you pay 20% of anything over £12,570 per year.”

This is missing context. Some workers will pay more than 20% tax if they earn more than the higher rate threshold.

Workers across the UK don’t pay income tax on the first £12,570 they earn. When people in England, Wales and Northern Ireland earn more than £12,571, they begin to pay income tax on their earnings. This is initially taxed at 20%, as the video says, but this 20% only applies to earnings between £12,571 and £50,270. Those who are paid more than this are taxed more than 20% on their higher earnings. 

Workers who earn between £50,271 and £125,140 are taxed 40% on their earnings in this bracket, and those who earn over £125,140 are taxed 45% on their earnings above that figure. 

Additionally, the video claims this is “literally what every workplace in the UK does”, but as some aspects of tax are devolved, this isn’t the case in Scotland. 

In Scotland, workers do start paying income tax at £12,571 as well, but unlike the rest of the UK, they’re taxed 19% on earnings between this figure and £14,732. Those who earn over £14,733 are taxed 20% on their earnings between this and £25,688. Workers with higher salaries than this then pay more than 20% tax on earnings in certain thresholds. 

How much national insurance do we pay?

The video claims: “Your national insurance tax is 12% of anything over £9,500 a year.” 

Employees start paying National Insurance when they earn more than the Primary Threshold. This is currently £1,048 a month (£12,576 a year), not £9,500. In 2021, the Primary Threshold was £792 a month, or £9,504 a year. It’s possible that the video was using this outdated figure. 

The video claims that National Insurance payments are 12%. While this was the rate last year and at the start of 2024, the current rate of National Insurance is 10%. This has been the case since 6 January 2024, though National Insurance is due to decrease to 8% at the beginning of April. 

This 10% applies to all earnings between the Primary Threshold and the Upper Earnings Limit, which is £4,189 a month (£50,268 a year). Employees still pay National Insurance on earnings above this threshold, but at a reduced rate of 2%

Before April 1977, married women could choose to pay a reduced rate of National Insurance. No one has been able to elect to do this since April 1977, but the government still honours a reduced rate for those women that were married and chose to pay a lower rate before April 1977. That rate is currently 3.85%, rather than 10%. 

Is 8% pension contribution mandatory?

The video claims “by law we need to take 8% of your salary to put into your pension, which you pay 5% and we cover a generous 3%.”

Since 2018, all employers have had a legal obligation to set up a workplace pension scheme and enrol all eligible employees into it. Currently, employers contribute a minimum of 3% and employees contribute a minimum of 5%. 

Employers have to automatically enrol employees into a workplace pension scheme if they aren’t already in a qualifying pension scheme, are over 22 years old but under the State Pension age, earn more than £10,000 a year and usually work in the UK. There are some specific exemptions to this.

Employees are not forced to stay in their workplace’s pension; they are allowed to opt out of this automatic enrollment scheme. 

Image courtesy of Kelvin Stuttard

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