The Chancellor announced in his Spring Statement that the NI ‘primary threshold’ will be increased in July 2022, to £12,570 per year, bringing it into line with the starting point for income tax. This means any individual earning below £12,570 on UK payroll will not pay any tax or NI.
However, you may be asking yourself, is this not worse off, as if I don’t pay any NI, will I lose out on my qualifying years for State Pension from 20222/23 tax year?
The answer is that any individual earning above the NI “lower earnings limit” of £6,396 in 2022/23 tax year, will receive NI “credits” to protect their state pension even though they are no longer liable to pay NIC contributions.
Additionally, the Spring Statement changes are particularly favorable to the low income self-employed. In the financial year just ending 2021/22, self-employed people had to pay flat rate (Class 2) NI contributions if their profit was above the ‘small profits threshold’ of £6,515.
From April 2022, no Class 2 NI contributions will be due until you your profit exceeds the ‘lower profits limit’ of £9,880. From July 2022, the lower profits limit will be increased to £12,570, the same as for employees.
However, as with employees, there is a safeguard for the self-employed in the form of National Insurance credits. For the self-employed this will apply to those with profits above the small profits’ threshold of £6,725 in 2022/23. The individual will automatically be credited towards their state pension even if they are not liable to pay any NICs.
