UK Chancellor of the Exchequer Rishi Sunak revealed that the National Insurance Contributions starting threshold will increase to £12,570 starting this July, an increase of £3,000.
It means that employees across the country will hold onto more of their earnings before they start having to pay tax.
As reported by the Daily Record, nearly 30 million people throughout the UK will benefit from the move — with an employee saving on average £330 a year beginning July 1.
READ MORE — DWP State Pension 'bumper increase' on the way for claimants
Sunak stated it was the largest tax cut in a decade, saying: "Around 70% of all workers will have their taxes cut by more than the amount they'll pay through the new levy."
As a result, workers will only need to start paying National Insurance if they earn more than £12,570 per year, a major increase over the planned £9,880 value.
However, starting in April, the Health and Social care levy will be introduced — a 1.25% increase on National Insurance contributions intended to support the NHS.
Sunak had reportedly been under pressure to drop the levy due to the worsening cost of living crisis, but decided to instead lessen its impact by increasing the threshold at which employees start paying National Insurance.
According to senior pensions and retirement analyst at Hargreaves Lansdown Helen Morrissey, though, workers earning under £12,570 may now lose access to vital National Insurance credits for their State Pension.
She said: “The State Pension forms the backbone of most people’s retirement and therefore, they should ensure they do not incur gaps unnecessarily, which means they end up with less in retirement.
“Many benefits come with automatic National Insurance credits. For instance, Child Benefit, Universal Credit and Jobseekers Allowance will credit you automatically. Other benefits such as Statutory Sick Pay will give you credits if you apply for them.
"It is therefore vital people worried they may no longer be getting National Insurance credits check to see what benefits they are entitled to, so these credits can be made.”
Helen added: “A further option for people looking to plug gaps in their State Pension record is to buy voluntary National Insurance credits. Each missing year costs around £800 and will give you 1/35th of your entitlement. Over the course of retirement they can be a very good value way of boosting your state pension entitlement.”
Automatic National Insurance Credits
You should get automatic National Insurance credits if you receive the following benefits
- Universal Credit
- Jobseekers Allowance
- Employment and Support Allowance
- Maternity Allowance
- Child Benefit
- Carers Allowance
- Income Support
You may be able to claim National Insurance credits in these instances
- If you are unemployed and looking for work but not claiming Jobseekers Allowance, you can contact your Jobcentre to claim credits.
- If you are on Statutory Sick pay and you do not earn enough to make a qualifying year NIC, you can still claim. The same goes for statutory maternity, paternity or adoption pay.
- If you are caring for one or more sick or disabled person for at least 20 hours a week and you don’t claim Carers Allowance or Income Support.
- You are under state pension age and you look after a child under the age of 12 you may qualify for Specified Adult Childcare Credit.
For more information and how to claim go to National Insurance credits: Eligibility on the GOV.UK website here.
