UK inflation has hit its highest level for more than a decade as supply chain disruption and record fuel prices have sent the cost of living soaring, according to official figures.
The Office for National Statistics (ONS) said the rate of Consumer Prices Index (CPI) inflation rose from 4.2% in October to 5.1% in November – the highest since September 2011 and a bigger leap than economic experts had predicted.
The data also revealed that the Retail Prices Index (RPI) measure of inflation soared to its highest level for more than 30 years – hitting 7.1% last month, up from 6% in October.
Laying bare the mounting cost-of-living crisis facing every household across the country, the ONS reported surging prices across a raft of goods and services, including fuel, energy, cars, clothing and food.
Figures showed that petrol prices jumped to the highest ever recorded – 145.8p a litre last month – while the cost of used cars also increased due to shortages of new motors as supply chain issues continue to affect the economy.
Combined with the upcoming increase to National Insurance Contributions (NICs) – a rise of 1.25 percentage points, from 12% to 13.25%, will come into effect from April and 2022 is already shaping up to be a challenging year for households across the country.
The increase to NI contributions will result in higher deductions from employees salaries, however, high earning Scots in the upper tax band contribute more in NICs than those in other parts of the UK.
Under the separate Scottish tax bands those earning over £43,663 already pay more income tax at 41 per cent rate than high earners in England, who enter a 40 per cent tax band on earnings over £50,270 a year.
As well as paying more tax under the different rate, Scottish high earners also continue paying NICs at 12p in the pound on their higher earnings up to the £50,270 mark where NICs fall back to 2p in the pound.
Here is everything you need to know about the changes to NICs and how it will affect your monthly pay.
What is National Insurance?
National Insurance is a tax on earnings paid by employees, employers and the self-employed who pay it on their profits.
National Insurance is used to pay for the NHS, state benefits and the State Pension.
What are the changes to National Insurance Contributions?
Employees, employers and the self-employed will all pay 1.25p more in the pound for National Insurance Contributions from April 2022.
Who pays National Insurance?
- Employees pay NI on their wages
- Employers also pay extra NICs for staff
- Self-employed pay NI on their profits
From April 2023, National Insurance will return to its current rate, and the extra tax will be collected as a new Health and Social Care Levy.
This levy will also be paid by people over State Pension age who continue to work.
How much will I pay under the new plans?
The amount of NICs you pay depends on your salary, however people earning under £9,568 don’t have to pay National Insurance and won’t have to pay the new levy.
Salary and new National Insurance Contribution
- £20,000 – will pay an extra £130 a year (£10.80 per month)
- £30,000 – will pay an extra £255 a year (£21.25 per month)
- £50,000 – will pay an extra £505 a year (£45.80 per month)
- £80,000 – will pay an extra £880 a year (£73.33 per month)
- £100,000 – will pay an extra £1,130 a year (£94.16 per month)
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You can read more about the changes to NICs in the new Build Back Better: Our Plan for Health and Social Care document on the GOV.UK website here.
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