The government has raised the threshold for the levy, which will save millions of workers around £330 a year, the government says. This works out to £30 a month and comes after the Treasury decided to increase National Insurance payments by 1.25 percentage points. Due to the cost of living crisis, the move has been criticized by MPs and financial experts, but the most recent change is expected to rectify the initial rise in payments.
He said he would raise the annual national insurance threshold for employees, as well as for the self-employed.
The threshold is the point at which people begin to pay the normal rate of the levy on their wages or on their profits.
Mr Sunak confirmed that the main National Insurance main rate threshold would increase from £9,880 to £12,570 from July 2022.
Some 30 million people are expected to benefit from the change and realize an annual saving of £330, according to the government.
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About 70% of those who have contributed to National Insurance will pay less.
People will continue to pay less even taking into account the upcoming health and social care tax, which will be used to pay for the social care sector in the UK.
On top of that, the government estimates that 2.2 million people will stop paying Class 1 and Class 4 National Insurance contributions and Health and Social Care Tax.
Changes to the National Insurance threshold were implemented earlier this month (July 6) and will likely save households £30 a month.
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Financial experts cited the decision as “good news” for low-income people.
Steven Cameron, director of pensions at Aegon, noted how National Insurance has been subject to multiple changes over the past two years.
Mr Cameron explained: ‘The Chancellor has played tricks and rounds with Income Tax and National Insurance.
“Freezing most income tax thresholds until 2026 is causing millions more people to pay more income tax as wages rise.
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“Raising the threshold will also prevent more than two million people from paying national insurance.
“In other good news, those who no longer pay NICs will still receive credits towards their future state pension as long as they earn more than £6,396 a year.
“While this is welcomed by these people, it calls into question the viability of funding state pensions, with today’s state pensions being paid for by the NICs of today’s workers. ”
Alice Haine, personal finance analyst at Bestinvest, added: “However, from July 6 the threshold at which National Insurance kicks in is increased from £9,880 (the increase introduced on April 6, from the 9 previous £568) to £12,570, bringing it within the income tax threshold, giving 2.2 million workers a full break from NI payments, although they will continue to receive all related benefits to the payment of the tax.
“This equates to a saving of over £330 on average, compared to the previous three months of National Insurance contributions, with the cash increase also expected to benefit an additional 30 million typical employees earning more than the new threshold of £12,570 including high earners. .”