National Insurance easily explained is to help self employed, employees and employer understand National insurance.

In this weeks podcast I'm going to be talking about national insurance, NI for short.  Specifically

• what it is
• why you pay
• how much you pay
• the planned increase in NI for April 2022.

The government has announced a hike in NI to fund social care. Fear not that's covered later in this week's podcast.

National Insurance is a tax that helps pay for a variety of things.  For example, the NHS, social care and other public services. Moreover, It's also used to help fund state benefits such as Jobseeker's Allowance and Employment Support Allowance.

NI is confusing because it has a number of parts.  I am going to explain this in simple language.  You can understand what they are, why you pay them and how much they cost.  Check the link to find out more about how much you pay

Listen now to find out more!

Conclusion

Moreover, if you want to understand National Insurance, National Insurance easily explained is here for you.  You will learn how it affects you, avoid confusion and overwhelm.  Many businesses, employers and employees find themselves in the same situation, wanting to know about NI.  National Insurance easily explained will help.

Listen to find out more.

My mission is to inform, inspire and educate you to get closer to your numbers. You can make more profits, save tax and time, improve your well-being and your money mindset.

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Are you self-employed, or an employee, or an employer who's confused about national insurance? This week I'm going to be talking about national insurance, NI for short, what it is, why you pay it, and how much you pay. Be aware, the government has announced a hike in NI to fund social care. Fear not. That's covered

later in this week's podcast.

You are listening to the I Hate Numbers Podcast with Mahmood Reza. The I Hate Numbers podcast mission is to help your business survive and thrive by you better understanding and connecting with your numbers. Number love and care is what it's about. Tune in every week. Now, here's your host, Mahmood Reza.

Hi folks. Welcome to another weekly episode of I Hate Numbers. The podcast is part of my mission to inform, inspire, and educate you to get closer to your numbers. Above all, you can make more profit, save tax, save time, improve your well-being, and financial understanding. How cool is that? Let's crack on with the podcast.

What is national insurance? Now, don't be misled by the word insurance. NI is a tax. It's a tax that was introduced back in 1911 to provide a fund for those out of work and seeking medical benefits. It has now grown to provide, in principle, funding for the NHS, state pensions, and other welfare benefits such as job seekers' allowance. Who pays national insurance?

The payers of national insurance are self-employed, and employees who are over 16, and below state retirement age, and employers. Self-employed includes sole traders, and partnerships, and employees and employers are within the PAYE system. How much you pay depends on your level of earnings and your employment status.

Let me run through some headline numbers with you. Please check out the show notes for some more detail. Let's deal with the self-employed. There are two rates called a main rate, followed by a rate, which applies once you go over what's called an earnings threshold. So, for the year 21/22, the percentage rates are 9% as the main rate, and then a 2% is levied

once you exceed the threshold level. For employees, it's a similar principle. There's a 12% headline, main rate, and then a 2% supplement that applies once you as an employee exceed the threshold level of earnings. For employers, there is no upper limit and there is only one rate, and that rate is currently

13.8% over an earnings threshold. Now, what do we mean by earnings? Now, earnings for the self-employed, effectively, tax-adjusted profits, so not what you invoice your clients, but the profits you declare for tax purposes for the year 21/22. The thresholds are 9568, going up to what's called a high limit of 50,270.

Again, if you haven't committed those numbers to memory, fear not. Check out the show notes for a table that shows you what these figures are. If you're an employee, then your earnings threshold is fundamentally your salary and wages, bonuses, and tips, and your earnings threshold is the same level as it is for the self-employed. For employers,

unfortunately, the earnings threshold is lower. Once your employees have earnings over 8840, then you pay employer's National Insurance at 13.8%. Earnings for an employer, by the way, is not only wages and salaries that are paid up, but it will also include the value of any benefits in kind provided to your employees.

So if you provide company cars, medical insurance, private mileage, those will be taken as employee benefits, and they'll be included when you work out the national insurance charges. Now, before we proceed on with this, it's worth noting that if you are an employee, then if you earn below 120 pounds per week, there is no national insurance that is payable. If your earnings are

between 120 and 184 pounds per week, you don't actually pay any national insurance. No money leaves your wage packet. No money leaves your accounts, but you instead, you are credited with some national insurance. Now, that's good news because national insurance, as we said at the beginning, contributes towards state pension

and other welfare benefits. So, even though no physical payment is made, you'll still be credited with some national insurance. Just to add to this, we've talked about the rates, we've talked about the thresholds. For national insurance purposes, we also have another piece of vocabulary, which I'm going to introduce to you.

I've got my jargon buster by my side, and that's what we have by calling national insurance. We divide it up into classes, so for employees, employees pay Class One National Insurance, as do employers, self-employed pay Class Two and Class Four. The Class Four refers to the table of numbers that I've read out to you.

Class Two is a smaller flat rate contribution that's currently levied at just a shade over three pounds per week when your profits exceed approximately six and a half thousand pounds. Now, if you've done your number calculation correctly, that's Class One, Class Two, and Class Four. The missing number, it hasn't been omitted, is Class Three called a Voluntary Contribution, and there are instances where you can volunteer to pay national insurance.

It sounds crazy, but it's true. Now, you may have gaps in your national insurance record, and you may not get any national insurance credits, and this could be for a number of reasons. You could be in employment, but your earnings were very modest, very low. You could be unemployed and not claiming benefits. You could be self-employed, but you haven't made any contributions, not even the flat rate class two national insurance because your profits are quite small.

You may be in a loss-making situation, or you could have been living or working outside of the United Kingdom. Now, gaps in your national insurance record means that you may not build up enough contributions to either get the full state pension. Currently, you need 35 qualifying years of national insurance contributions to qualify for a full state pension.

It may also mean that there are other benefits such as job seekers allowance that you may not be entitled to because you haven't made enough national insurance contributions. You can elect to pay voluntarily to plug those gaps. Check out the show notes after the broadcast to check for a link so you can check out your own NI records.

So I've talked about what national insurance is, why you pay it, the amounts that you pay. What I want to conclude now on this week's episode is to talk about the proposed increase in NI plan for April 2022. The plan increase is to help fund social care by increasing national insurance for those who are self-employed, employees, and employers.

The irony is that those who are at state retirement age, for example, will not pay national insurance, and they don't pay the increase. There's a planned increase of two and a half percent, which will be split between employee and employer. So, the main rate of 12 percent moves up to 13 and a quarter. The 2% supplement increases to three and a quarter percent.

If you're self-employed, then your main rate goes from nine to ten and a quarter, and your supplement increases likewise from two to three and a quarter. As an employer, your 13.8% rate shifts upwards to a shade over 15%. What does that mean in pound notes terms? If your earnings are 20,000, whether that's profits, or wages and salaries, that means you pay an extra 130 pounds a year from April, 2022.

If your earnings are in the region of 50,000 pounds a year, that equates to an extra 505 pounds per year. The proposed increase is meant to be temporary. I'll say meant to be temporary. So, from 23/24 onwards, that increase will be replaced by a social fund levy. That social fund levy will be payable by all, even those who are at retirement age.

Okay, folks, I hope you found this podcast useful. If you found it useful, obviously I'd love it if you could share it with those who will get some benefit from that. Subscribe to the channel, and as a hat trick, I'd love it if you could leave some comments on the podcast accordingly. Until next week, folks, have a great week, and don't have nightmares.

We hope you enjoyed this episode and appreciate you taking the time to listen to the show. We hope you got some value. If you did, then we'd love it if you shared the episode. We look forward to you joining us next week for another I Hate Numbers episode.