National Insurance payments will rise from Wednesday as part of the government's plans to fund the NHS and social care.
The energy price cap hike, council tax rises and an increase in VAT have already exacerbated the cost of living crisis this month And now, with the start of the new tax year on Wednesday, April 6, another raft of changes will be coming into force.
Brits will see their National Insurance (NI) payments rise by 1.25 per cent. Payments will only be collected on wages above £9,880, although this rises to £12,570 in July – a threshold change announced by the chancellor, Rishi Sunak, at the recent spring statement.
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Employees would previously pay 12 per cent on earnings up to £50,270 and 2 per cent on anything above that. From April 6, the rate goes up to 13.25 per cent and 3.25 per cent respectively. For the self-employed, rates will go up from 9 per cent and 2 per cent to 10.25 per cent and 3.25 per cent.
How much more or less you will pay in National Insurance once the threshold rises depends on your current salary. According to money saving expert Martin Lewis, the point at which you’ll start paying more NI after the threshold change in July is around £35,000.
For example, someone earning £30,000 a year currently pays £204 a month in NI contributions. This will rise to £222 a month when the 1.25 percentage point increase comes in. However, when the threshold changes in July, the payments will drop to £192.
"Effectively the way it works on earnings is from over around £9,600, all the way up to around £35,000, you will either not pay any more, or lower down [the pay scale], will pay less National Insurance than currently," Mr Lewis said. "If you earn £35,000 or more then the 1.25 percentage point increase outweighs the change in the starting threshold, so you will pay more National Insurance."
The changes to National Insurance are not the only thing that could affect your wallet this month. April will also see a rise in Air Passenger Duty, which could affect the price of flight tickets, as well as a 3.1 per cent increase in benefit payments.
Here are four other changes coming in April that you should be aware of.
Air Passenger Duty rise
From April 6, the rate of Air Passenger Duty (APD) will rise - but only for long-haul flights. APD is charged in two bands - Band A for flights of between 0 to 2,000 miles, and Band B for flights of more than 2,000 miles.
The cost of an economy ticket for passengers over the age of 16 has been frozen for Band A - so that's £13 for the reduced rate, £26 for the standard rate and £78 for the higher rate. But APD will rise for Band B flights from £82 to £84 for the reduced rate, from £180 to £185 for the standard rate, and from £541 to £554 for the higher rate.
Standard rate applies on any flight where the seat pitch (distance between seats) is at least 40inches - that generally applies in anything business class or over but varies from flight to flight. Higher rate planes are anything over 20tonnes with fewer than 19 seats.
Further changes will come in for April 2023, when the air passenger duty on domestic flights (within the UK) will be halved. Next year will also see the introduction of a new ultra long haul band in APD, which will cover flights of over 5,500 miles.
Universal Credit
Millions of people will see their Universal Credit payments go up from April 11 when a 3.1 per cent increase comes into effect. The rise will lift payments by around £2.50 per week for a single person aged 25 and over.
After the controversial removal of a £20 per week uplift introduced during the coronavirus pandemic, The Department for Work and Pensions (DWP) confirmed the change last November. In the Autumn Budget, Chancellor Rishi Sunak reduced the taper rate – the rate at which claimants lose the benefits – to 55p, meaning workers take home 8p more of an extra pound earned and also announced an increase to work allowances, equating to £500 a year for eligible claimants.
The changes to the standard allowance are as follows:
- Single and under 25: £265.31 (currently £257.33)
- Single and 25 or over: £334.91 (currently £324.84)
- In a couple and both under 25: £416.45 (currently £403.93)
- In a couple and one or both 25 or over: £525.72 (currently £509.91)
State Pension
The DWP has also confirmed that the State Pension will rise by 3.1 per cent from April 11.
The basic State Pension will rise from £137.60 to £141.85 a week with the full new state pension rising from £179.60 to £185.15. Anyone receiving a state pension can decide whether they want to be paid in weekly instalments or paid every month.
The State Pension triple lock ensures the state pension increases each year in line with whichever is highest out of inflation as measured by the Consumer Prices Index (CPI), average earnings, or 2.5 per cent. The average earnings benchmark was suspended for the 2022-23 financial year, but the DWP has insisted this is “for one year only”.
Personal Independence Payment and Disability Living Allowance
The 3.1 per cent increase will also apply to Personal Independence Payments (PIP) and the Disability Living Allowance (DLA). It means someone receiving the highest rates for DLA and PIP will see their regular payment rise from £608.60 to £627.60.
Both PIP and DLA are paid every four weeks into claimants' bank accounts. The new rates will see claimants receive between £97.80 and £627.60 each day period. This increase is equivalent to between £1,271.40 and £8,158.80 in extra financial support for PIP and DLA claimants during the 2022/23 financial year.
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