Boris Johnson briefs cabinet on National Insurance cuts
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The change was introduced by the former Chancellor Rishi Sunak as part of a £15billion cost of living support package. The support is aimed at helping the lowest earners and most vulnerable households keep up with soaring inflation and the rising cost of living.
The threshold at which someone begins to pay National Insurance contributions has risen from £9,880 to £12,750.
The change was announced after the Government National Insurance contributions by 1.25 percentage points in April.
Ministers say that the tax change will benefit around 30 million people, with a tax cut of around £330 a year.
The amount people need to pay is also changing, depending on how much they earn in a year.
To figure out how much one may save each year, the Government has launched a calculator to help people work out how much they will save from the National Insurance threshold change.
The new calculator uses each person’s salary information to give them an idea of how much people will save if they pay tax through PAYE.
Employees can use the tool to work out how the changes to the threshold, and the rate increase, will affect their pay.
According to Gov.uk, someone on a salary of £20,000 will be £291 better off over the year.
As salaries get higher, the savings someone can expect decrease.
For example, someone earning £25,000 will pay about £244 less thanks to the new changes.
Anyone earning £30,000 will pay £197 less, and those on higher salaries of £40,000 will pay about £103 less over the year.
Those who take home £60,000 per year will pay roughly £84 more than in 2021.
However, these figures are just estimates, and the true amount of money saved will be visible on payslips.
The former Chancellor said seven out of 10 people will be paying less for National Insurance from July even with the 1.25 percentage point increase to the contributions.
Those who are self-employed pay National Insurance differently, as they are responsible for working out how much they owe which will either be Class 2 National Insurance or Class 4 National Insurance.
The tool will not work for those who are not liable to pay the main rate of Class 1 contributions on earnings or profits.
This will include people over state pension age, those who pay a reduced rate, people who work outside the UK or people who are self employed.
Workers will also not get a correct amount if they have more than one employer or are not evenly paid in a monthly amount.
This could include those who receive a bonus, who are paid by commission or who are paid weekly.
Changes to a person’s circumstances such as a pay rise or changing employers could also affect their contributions.
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