To ask Her Majesty's Government, further to the rise in National Insurance contributions from April, what financial support they will provide to support employees of umbrella companies.
30 March 2022
The Government has consistently said that the best way to support people’s living standards is through good work, better skills, and higher wages. To that end the Government has taken decisive action to make work pay by cutting the Universal Credit taper rate from 63% to 55%, meaning that claimants will be able to keep more of their earnings. At the same time, we have also increased the Work Allowance by £500 a year, this is the amount that households with children or a household member with limited capability for work can earn before their Universal Credit award starts to be tapered, meaning many claimants will be able to earn over £550 each month before their Universal Credit begins to be reduced.
The taper is applied to earnings net of tax, national insurance contributions, including the proposed increase from April, and 100 per cent occupational/personal pension contributions.
Reducing the taper rate from 63% to 55% means that the marginal effective tax rate for someone paying basic rate tax and national insurance will fall from around 75% before these changes to under 70% in 22-23 (this is after accounting for the introduction of the Health and Social Care Levy).
In the Spring Statement, the Chancellor of the Exchequer announced that the earnings threshold where people start paying National Insurance would increase to £12,570 from 6 July, which is worth over £330 a year for employees.