Boris Johnson has broken his manifesto promise and pressed ahead with his plan to increase taxes in the form of a 1.25 percentage point hike to National Insurance - but how much will it cost the average worker?
National Insurance is essentially a tax that counts towards your entitlement to state benefits and pension.
Unlike income tax, the percentage of NI contribution you pay does not increase much, the more you earn.
The key differences between National Insurance and income tax are:
As long as you earn more than £184 a week or around £9,500 per year, you pay National Insurance, whereas income tax does not kick in until after your wage rises above £12,570 per year.
You stop paying NI payments it after you hit pension age - although the government's new policy has changed this slightly.
To qualify for a state pension and some benefits you must have paid National Insurance for 35 years - if you've faced a period of unemployment you can voluntarily contribute to catch up.
Income tax thresholds rise as income rises, National Insurance is a flat amount up until you earn £50,000 and only increases slightly after that.
It is UK-wide, whereas the four nations of the UK set their own rates of income tax.
Between 2022 and 2023 National Insurance rates will rise by 1.25 percentage points, from 12% to 13.5%.
From April 2023, the increase will appear as a separate entry on individuals’ payslips.
It is at this point that working adults above pension age will chip in.
The increase is also technically a 2.5% rise because employers also pay National Insurance for their employees and businesses are being subjected to the same 1.25% rise.
How much will it cost me?The tax will be progressive, meaning those who earn more will pay more.
For example, a basic rate taxpayer earning £24,100 will contribute £180 a year and a higher rate taxpayer earning £67,100 will contribute £715 a year.
People earning £30,000 will pay £255 more.
People earning £50,000 will pay £505 more.
People earning £80,000 will pay £808 more.
People earning £100,000 will pay £1,130 more.
Who will this impact the most?
The government has said in 2022-23, more than a third of the overall tax increases and over half the increase in dividend tax rates will come from the top 10% of households, with the majority coming from the top 20% of households.
Despite what the government says, the increase will impact the young and the average worker the most for several reasons.
Firstly, people of pension age will only be paying 1.25% National Insurance while the working-age population will be paying the full 13.5%.
National Insurance's progressiveness is also not entirely linear.
Under the current system, you pay 12% on your earnings between £9,568 and £50,270, and 2% (rising to 3.25% under the new plan) on any income above £50,270 meaning the more you earn the less of a percentage of your wage will be spent on National Insurance.
On top of this people who earn their incomes through other ways like dividends or rent do not pay National Insurance - although today's policy did also include a 1.25% rise in dividends taxes.
Furthermore, many workers have suffered pay cuts, wage freezes and job losses during the coronavirus pandemic.
The government has also said it is committed to cutting Universal Credit by £20 which will also impact workers on the lowest wages.
Rises in living costs are also affecting households, with the Consumer Prices Index (CPI) measure of inflation up by 2% annually in July.Housing costs are also squeezing people’s finances, with the average UK house price hitting a record high of £262,954 in August, according to Halifax.