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Autumn Budget 2021: National Insurance rates and thresholds rise, while income tax is frozen
Taxpayers should expect rises for National Insurance and council tax bills, while income tax is frozen, according to today's Autumn Budget announcements.
Government documents also confirmed that National Insurance rates will rise by 1.25 percentage points from April 2022, a change which was initially announced in September. However, the red Budget book revealed some NI income thresholds are also rising in line with inflation, which means you may be able to keep more money than you might have thought.
Here, Which? reveals how the changes will affect the amount of income tax and National Insurance you'll pay in the 2022-23 tax year, plus how much your council tax bill could increase by.
- Join the conversation on today's Budget by tweeting us @WhichMoney
How much income tax will I pay in 2022-23?
In the Budget announcement in March 2021 the Chancellor, Rishi Sunak, said that all income tax thresholds would be frozen until 2026. Today's Autumn Budget announcement confirmed this would be the case: all income tax rates and thresholds will remain the same as they were in 2021-22, including the personal allowance, which is sticking at £12,570.
The table below shows how income tax is due to change for the 2022-23 tax year.
| 2021-22 | 2022-23 | |||
| Tax band | Income | Tax rate | Income | Tax rate |
| Basic rate | £12,570-£50,270 | 20% | £12,570-£50,270 | 20% |
| Higher rate | £50,271-£150,000 | 40% | £50,270-£150,000 | 40% |
| Additional rate | More than £150,000 | 45% | More than £150,000 | 45% |
This means that most people's income tax bills will remain the same next year.
However, freezing income tax thresholds for several years is likely to increase many people's tax bills; even small pay rises will see workers pushed into higher income tax bands, causing them to pay more tax on a portion of their income.
- Find out more:Autumn Budget 2021: what will it mean for your money?
Income tax in Scotland
The Scottish Budget is due to take place on 9 December 2021.
In this speech, the finance secretary, Kate Forbes, will set out the Scottish government's spending plans for 2022-23, including any changes to income tax rates and thresholds.
In 2021-22, Scottish income tax features five rates and bands:
| Tax threshold | Income | Tax rate |
| £12,570-£14,667 | Starter rate | 19% |
| £14,667-£25,296 | Scottish basic rate | 20% |
| £25,296-£43,662 | Intermediate rate | 21% |
| £43,662-£150,000 | Higher rate | 41% |
| More than £150,000 | Top rate | 46% |
The Scottish government usually follows the same personal allowance as the rest of the UK; however, as the last Scottish Budget was held before the Westminster Budget announced a five-year threshold freeze on income tax thresholds, it's not yet known whether the Scottish government will follow suit.
- Find out more:income taxes in Scotland
Income tax in Wales
The Welsh government plans to publish its draft Budget for 2022-23 on 20 December 2021.
Income tax in Wales has been devolved since 6 April 2019, but the rates and thresholds have so far remained the same as in England and Northern Ireland.
- Find out more:income tax in Wales.
National Insurance rates in 2022-23
In September 2021, the Prime Minister, Boris Johnson, announced that National Insurance rates would be increased by 1.25 percentage points from April 2022 to bring extra funding to the NHS and to help with the current social care crisis.
This has been confirmed in today's Budget documents.
With National Insurance income thresholds, the lower earnings limits will increase by 3.1% - in line with September 2021 CPI inflation. Upper earnings thresholds, however, are being frozen at £50,270. This means you'll be able to keep more of your money before National Insurance contributions (NICs) kick in, offsetting some of the effects of the rate rises.
For employees paying Class 1 contributions, this is how NI payments will work based on annual earnings:
| 2021-22 | 2022-23 | ||
| Earnings | Class 1 rate | Earnings | Class 1 rate |
| Less than £9,568 | 0% | Less than £9,880 | 0% |
| £9,568-£50,270 | 12% | £9,880-£50,270 | 13.25% |
| More than £50,270 | 2% | More than £50,270 | 3.25% |
Find out more:National Insurance rates
Self-employed National Insurance in 2022-23
For self-employed workers, Class 2 weekly contributions will also increase by September 2021 CPI inflation. This means you'll pay £3.15 a week in 2022-23.
Class 4 rates will increase by 1.25 percentage points.
As with employed workers, lower earnings limit thresholds will increase by 3.1%, while upper payment thresholds will be frozen.
| 2021-22 | 2022-23 | ||
| Profits | Class 2 and 4 rates | Profits | Class 2 and 4 rates |
| Less than £6,515 | 0% | Less than £6,725 | 0% |
| £6,515-£9,568 | £3.05 per week (Class 2) | £6,725-£9,880 | £3.15 per week (Class 2) |
| £9,568-£50,270 | 9% + £3.05 per week | £9,880-£50,270 | 10.25% + £3.15 per week |
| More than £50,270 | 2% + £3.05 per week | More than £50,270 | 3.25% + £3.15 per week |
- Find out more:self-employed National Insurance
Class 3 contributions
Class 3 contributions are usually paid voluntarily by those with gaps in their National Insurance contributions (NICs).
These gaps could affect your state pension in retirement and could also affect your entitlement to some benefits.
Class 3 contributions will also increase in line with September 2021 inflation from 6 April 2022:
| 2021-22 | 2022-23 |
| Class 3 contributions: £15.40 per week | Class 3 contributions: £15.85 per week |
Find out more:National Insurance contributions.
How much National Insurance will you pay?
To illustrate how these tax changes could affect how much tax you pay in the 2022-23 tax year, we've come up with some worked examples.
Someone who is employed and earns £30,000 a year would pay £2,452 for Class 1 National Insurance in 2021-22.
In 2022-23, this will rise to £2,665.90.
For a self-employed worker with profits of £20,000, they'd pay £1,097 in 2021-22 through a mix of Class 2 and Class 4 contributions. In 2022-23, they'll have to pay £1,201.10.
Use our calculator below to see how much National Insurance you'll pay next year; you can also select other tax years from the dropdown menu.
Currently, employees above state pension age do not pay National Insurance. Self-employed workers above state pension age do not pay Class 2 contributions but must pay Class 4 contributions for the tax year they reach state pension age; they do not have to pay beyond that.
However, this is set to change from April 2023, when the government plans to separate the 1.25 percentage point increase to National Insurance into a new health and social care levy, which will apply to those in work who are above state pension age.
- Find out more:what is National Insurance?
Council tax bills could rise
In line with previous years, the Chancellor's red book stated that local authorities are expected to increase council tax bills by up to 2% in 2022-23 without holding a local referendum.
In addition, any local authorities with social care responsibilities are expected to be able to increase the adult social care precept by up to 1% per year.
Parish councils may be able to put through larger bill increases without the need for a referendum.
- Find out more:what is council tax?
