New National Insurance rates – How Umbrella Workers Are Affected

Who pays National Insurance

National Insurance is a tax paid by employees, employers and the self-employed:

• employees pay NI on their wages as well as their income tax
• employers pay extra NI contributions for their staff
• the self-employed pay NI on their profits

National Insurance contributes to the cost of benefits and the state pension. However, the government can borrow from the NI fund to help pay for other projects. The government raised around £158bn last year through National Insurance.

Has National Insurance changed in November, 2022?

Yes, the National insurance increased by 1.25% in April 2022 and went back to its previous level on 6 November 2022.

April Changes: In April the Employee NI contributions jumped from 12% to 13.25% and Employers’ NI contribution jumped from 13.8% to 15.05%. 

Reason: Since last couple of years NHS and Social Care in the UK has been left with depleted resources. The government increased the NI contribution hoping to raise £12 billion by 6 April 2023.

November Changes: On 6th November the changes made in April were reverted. The Employee NI contributions dropped from 13.25% to 12% and Employers’ contribution dropped from 15.05% to 13.8%

Who all are affected?

Employees under pension age earning less than £12,570 a year, the move will make no difference – because they don’t pay NI. Above that income level, the amount saved increases as earnings do. So higher earners will benefit more than people on lower incomes – although higher earners will still contribute more tax overall.

How are Umbrella workers affected ?

Umbrella rates comprises all employers as well as employee costs. This means along with paying Employers NI, PAYE, Pension, etc, an Umbrella employee also pays employer costs, such as the Employer’s NI, Employer’s pension and the Apprenticeship Levy. These deductions are made from the amount received from the agency. Thus if the NI rates go up, the worker is left with lesser Net Pay.

What can umbrella workers do to minimise the impact?

Umbrella workers have without doubt contributed more towards NHS and social care since April 2022 than the rest of the UK. Umbrella workers should try and negotiate with their agency, a better rate to match the NI increase.

Is NI to be changed again?

Nothing is known at the moment. From April 2023, pensioners were originally going to have to pay the planned Health and Social Care levy on their earnings. This will no longer be the case due to the levy being scrapped. But stay tuned for more information.

We hope this helped anyone who needed a better understanding of their payslip. For further assistance from our advisors, please feel free to contact us on +447444174584 or email us at info@ovationsumbrella.co.uk for any enquiries. You can also send us a message via our contact page.