National Insurance: What’s happening in July and what does it mean for your pay packet?
Millions of workers can expect an income boost from 6 July as the change to the National Insurance threshold comes into force. We explain what it means for you


From 6 July, everyone earning money through PAYE, no matter what you earn, will get an income boost of around £30 per month as changes to the National Insurance threshold come into play.
Chancellor Rishi Sunak said in his Spring Statement that he was raising the annual threshold at which workers start paying National Insurance from 6 July. This is currently set at £9,880 – and will go up by around £3,000 to £12,570.
This means you can earn more before you start paying National Insurance.
This is the same level at which you start paying income tax – so from 6 July if you earn £12,570 or less you won’t pay a penny in income tax or National Insurance.
The increase in the National Insurance threshold was introduced in light of the current cost of living crisis and on the back of the controversial Government hike in National Insurance rates that came into effect in April this year when rates went up by 1.25 percentage points. The hike means workers now pay 13.25% on earnings up to £50,270, instead of 12%. For earnings above that, the rate of National Insurance is now 3.25% - up from 2%.
We explain what the changes mean for you and your next pay packet.
HOW WILL THE CHANGES AFFECT YOU IF YOU ARE ON PAYE?
Essentially, no matter what you earn, you will get around £30 more in your pay packet each month from July onwards.
As a rough guide, here’s what you can expect to get each month, based on how much you earn.
- If you earn less than £12,570 you will not pay any National Insurance contributions or income tax.
- If you earn £20,000 a year, you can expect to take-home £1,431 a month, (after income tax and national insurance payments), before July. But from July onwards, your pay will be around £1,461. This means an extra £30 a month. Note, the figure does not take into account pensions and other benefit deductions, so the actual amount you get may be different.
- If you earn £35,000 a year, your monthly take-home pay before July will be £2,265. From July, it will be around £2,295. Again, the figure does not take into account pensions and other benefit deductions.
- If you earn £55,000 a year, your monthly take-home pay goes up from £3,339 to £3,368 - excluding pensions and other benefits deductions.
According to the Treasury, 30 million workers will benefit, including 2.2 million people who will be taken out of paying National Insurance Contributions (NICs) altogether where they earn less than £12,570.
According to the Institute for Fiscal Studies, if you take into account the higher rates of National Insurance that took effect from April – coupled with the higher threshold at which National Insurance kicks in from July, those earning less than around £35,000 will see a fall in their overall NICs bill in 2022/23 relative to 2021/22.
This means that while it will be a welcome relief for employees to see the amount deducted for National Insurance on their payslip fall from next month, many people will still be paying more money in NICs compared to when the chancellor started changing the system earlier this year.
How does the change affect me if I am self-employed?
The self-employed will also benefit from the rise in the National Insurance threshold to £12,570 - however due to the way they pay National Insurance - they won’t see the full benefit until the start of the new tax year in April 2023.
Currently, self-employed people with profits over £6,515 (the small profits threshold) a year pay a flat rate NIC of £3.05 a week. These are known as class 2 contributions.
In addition to class 2, any profits above the lower profits limit of £9,568 are also subject to 9% NICs, while profits over £50,270 are subject to a further 2% (these are called class 4 contributions).
However, the small profits threshold and lower profits limit are also being raised from July 2022. The small profits threshold will increase to £6,725 and the lower profits limit will rise to £11,908. Those with profits between the small profits threshold and lower profits limit won't pay any National Insurance.
Sue Hayward is a personal finance and consumer journalist, broadcaster and author who regularly chats on TV and Radio on ways to get more power for your pound. Sue’s written for a wide range of publications including the Guardian, i Paper, Good Housekeeping, Lovemoney and My Weekly. Cats, cheese and travel are Sue’s passions away from her desk!
-
-
How to find cheap flights
Ever got on a plane and wondered if you’ve paid more for your ticket than the person next to you? Here’s how to bag the cheapest flights every time.
By Sue Hayward • Published
-
Energy bills predicted to go up - should you switch to a fixed price energy tariff?
With energy prices forecast to rise by 51% this autumn, we look at whether it's worth switching to a fixed tariff and what to do next
By Kalpana Fitzpatrick • Published
-
The £150 disability cost of living payment: who will get it and when?
Six million disabled people will get £150 as part of the Chancellor’s £15 billion cost of living support package. Here’s what you need to know about the £150 disability payment and when it will be paid.
By Sue Hayward • Published
-
How to contest a will
There will be times when contesting a will is the right thing to do. But how do you go about challenging the contents of a will?
By Sue Hayward • Published
-
Should you buy extended warranties?
Which? brands extended warranties ‘worthless’ - we explain why it’s not worth paying for them when buying gadgets and electrical goods
By Sue Hayward • Published
-
How to cut working from home costs
With many of us now working from home for at least part of the week, we highlight the simple steps you can follow to save money when working from home
By Ruth Jackson-Kirby • Published
-
Flight cancellations: what are your refund rights?
Strikes by airline workers look set to cause a summer of flight cancellations and chaos at airports across the country. We explain your rights, how to claim a refund and compensation
By Ruth Emery • Published
-
Inflation hits 9.1% - what it means for you
Prices hit 40-year high, adding more pressure to household budgets as food, energy and fuel costs continue to go up
By Kalpana Fitzpatrick • Published
-
What is travel insurance and why you need it
Planning a holiday? Travel insurance is a crucial safety net to protect against something going wrong with your trip. Here’s our guide on everything you need to know about getting the right cover for you
By Katie Binns • Published
-
Buy now, pay later regulation plans confirmed
Government confirms buy now, pay later regulation, giving better protection for shoppers
By Kalpana Fitzpatrick • Published