The burden of tax falling on workers and employers has increased as a hotly-debated rise in National Insurance payments takes effect.

Employees, businesses and the self-employed will pay an extra 1.25p in the pound. The UK government says that the funding raised will be spent on health and social care in England.

The Scottish Government is set to receive £1.1bn consequential funding following the rise in national insurance contributions.

Employees pay National Insurance on their wages, employers pay extra contributions for staff, and the self-employed pay it on their profits.

In September, the UK government announced the rise in contributions from 6 April, in part to help ease the burden on the NHS.

It means that, instead of paying National Insurance contributions of 12% on earnings up to £50,270 and 2% on anything above that, employees will now pay 13.25% and 3.25% respectively. The self-employed will see equivalent rates go up from 9% and 2% to 10.25% and 3.25%.

Those of state pension age do not pay the tax at present, and nor do those on very low incomes.

From now, employees will pay National Insurance contributions on earnings above £9,880 a year. From July, it will be paid on earnings above £12,570 a year.

Taken together, the measures mean that, over the next 12 months, anyone earning less than £34,000 a year will pay less in National Insurance than they did the previous year, while those earning more will see their payments rise.

The UK government said it had raised Employment Allowance from £4,000 to £5,000, so smaller firms could claim up to £5,000 off their National Insurance bills. Ministers said it meant 670,000 firms would not pay the tax at all.

SCC Director and Chief Executive of Inverness Chamber of Commerce, Stewart Nicol, spoke to BBC Radio Scotland earlier today to discuss the impact of the rise in National Insurance on Scottish businesses and why the increase should have been delayed. Please click here.

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