Low-income taxpayers will have roughly £300 more a year from July 6 as changes to National Insurance (NI) come into effect. However, it means others will pay more.
The shift affects the rate at which people pay NI and was announced by Chancellor Rishi Sunak at the Spring Statement in March. It came in a bid to lessen the impact of the decision to raise income tax contributions by 1.25 percentage points - which is about 10% - amidst the cost of living crisis.
The original rise means workers now give up 13.25% of their earnings to National Insurance, rather than 12%, up to £50,270. On earnings above that, the rate is rising from 2% to 3.25%.
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But under the plan announced in March, from July 6, 2022 the threshold at which workers start paying National Insurance will increase by £3,000. It means less of workers’ income will be subject to National Insurance as they will earn up to £12,570 a year before they pay it - a sharp increase from the current rate of £9,880, Yorkshire Live reported. To get more money stories straight to your inbox subscribe to our newsletters here.
The cost of living crisis including massively increased energy costs for power and fuel led the chancellor to try to help. It has been estimated that 30 million workers will benefit from the move. An extra 2.2 million people will not have to pay NI at all, as generally speaking workers won’t pay national insurance or income tax if they earn below £12,570 a year. People earning more than this will still feel the benefit and pay less NI overall due to the higher threshold.
The government website has a special tool on it for people to input key wage information and then it will give you an estimate of how much less you’ll pay. To use it click here. The new calculator uses your salary information to give you an idea how much you'll save if they pay tax through PAYE.
Someone aged 25 working 37.5 hours a week on minimum wage would earn £17,100 a year - and save £318 in NI. This is because their NI bill would fall from £917.52 currently to £599.40, The Mirror reported. Someone earning £20,000 a year would be £291 a year better off and a taxpayer on £30,000 would save £197.
However, a high earning on a £50,000 salary would save just £10 - and anyone earning £100,000 per year would pay £459 more. The Treasury stated that the tool will “help people budget” during the cost of living crisis.
The chancellor added that seven out of 10 people will be paying less for NI from July even with the 1.25 percentage point increase to the contributions.
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