The Government has been accused of misleading workers about the true cost of its tweaks to the National Insurance contributions (NICs) regime.

An HMRC tax tool launched to help workers understand their new NICs liabilities makes it look as if the Government is reducing their bills rather than increasing them, critics have said.

On 6 July 2022, the Government reduced the threshold at which most people start paying NICs from £9,880 to £12,570.

Prime Minister Boris Johnson hailed the change as the biggest tax cut in a decade to help people grapple with the cost of living crisis.

However, the Government also increased the rate of the tax by 1.25 percentage points earlier in 2022, meaning a lot of workers are paying extra in NICs.

HMRC's NI calculator explained

Criticism has been levelled at the Government's NICs calculator because of the method it uses to give users an estimate of their new tax liability.

For instance, the Government calculator says a worker on £50,000 per annum will pay £4,958 in NICs from 6 July 2022 to 5 July 2023, down from £4,968 for the previous year - a saving of £10.

However, this obscures the tax rises earlier in the year, with critics saying a fairer comparison would be between the current tax year (6 April 2022 to 5 April 2023) and the previous one.

Running the numbers this way reveals that workers making more than around £35,000 a year will be paying more in NICs compared to the 2021/22 tax year, even after the threshold increase.

So, workers earning £50,000 will actually pay £197 more in the 2022/23 tax year than the one before.

‘Sleight of hand'?

Danielle Boxall of the Taxpayers' Alliance called the HMRC calculator a "sleight of hand", adding:

"Aligning income tax and National Insurance may be a welcome step to simplify the system, but it will be easily offset by the highest tax burden in 70 years - leaving taxpayers out of pocket overall."

Tina McKenzie, policy chair at the Federation of Small Businesses, said:

"Memories haven't faded of the tax hikes that landed in April, which today's changes only partially unwind.

"These adjustments shouldn't be seen in isolation, we still face a higher tax burden than we did in March"

A Government spokesperson insisted the Government had been "honest and transparent" about how its calculator worked.

"We wanted to make our online tool as easy to understand as possible", they added.

How will the changes to NICs affect you in the 2022/23 tax year?

A Treasury insider seemed certain that using the 12-month period to July was a legitimate way of showing the effect of the tax change from the time it came in, in a comment published by The Telegraph.

Whether it is or is not, some taxpayers will want to understand the changes to their NICs according to their income in terms of tax years.

The following table shows you what you might have missed from the HMRC calculator:

Salary (£)  HMRC calculator  Standard tax year comparison 
15,000  £338 better off  £241 better off 
20,000  £291 better off  £179 better off 
30,000  £197 better off  £54 better off 
40,000  £103 better off  £72 worse off 
60,000  £84 worse off  £332 worse off 
80,000  £272 worse off  £571 worse off 
100,000  £459 worse off  £882 worse off 

Talk to us about your tax bill for the 2022/23 tax year.