MORE than 27million workers are in line for a £450 wage boost kicking in from next week.
This is thanks to another cut to National Insurance coming into effect.
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The 2p reduction to the main rate of National Insurance Contributions (NICs) was confirmed by the Chancellor in the Spring Budget.
The change means that someone earning an average salary of £35,000 will save more than £448.60 a year.
This increases to a maximum of around £750 for those on salaries above £50,000.
The legislation was brought it after the Budget to enable the cut to come in from April 6 – the start of the new tax year.
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Although it’s important to note that you may not see the boost until May, depending on when you get paid.
It follows a two percentage point cut from 12% to 10% that came into effect in January.
When combined with the autumn reductions, it means 27million employees will get an average tax cut of £900 in 2024.
Two million self-employed people will also see the main rate of National Insurance slashed from 8% to 6%, working out at an average saving of £350 a year.
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The move will come as a welcome break for many already struggling to keep up with high energy bills and the cost of living.
National Insurance is a tax on your earnings that goes towards state benefits like state pension, statutory sick pay, maternity leave and unemployment benefits.
What is National Insurance?
National Insurance is a tax on your earnings, which is put into a fund to use for some state benefits.
This includes the state pension, statutory sick pay, maternity leave and unemployment benefits.
If you are a UK national, you should receive an NI number and card before you turn 16, but you may have to apply.
This number allows the government to track your earnings and apply the right amount of tax.
Who pays National Insurance?
You pay National Insurance if you’re 16 or over and either:
- An employee earning above £242 a week
- Self-employed and making a profit of more than £12,570 a year
It is deducted from your wages each month.
If you’re employed, you can see your contributions by looking at your pay slip.
Once you reach state pension age, you don’t need to pay it at all.
There are different types of National Insurance, known as “classes”, and the type you pay depends on your employment status, how much you earn, and whether you have any gaps in your National Insurance record.
What is National Insurance?
NATIONAL Insurance is a tax on your earnings, or profits if you’re self-employed.
These contributions make you eligible for things like the state pension and certain benefits.
You’ll usually pay National Insurance Contributions (NICs) when you’re over the age of 16 and earning a certain amount.
For example, if you earn £1,000 a week, you pay nothing on the first £242.
Earn over that and you pay 10% on the next £725 – so £72.50. Then you pay 2%o on the rest, so £33, which works out as 66p.
For the self-employed rates are slightly different.
You can also get something known as National Insurance in some circumstances when you’re not working, for example when you have kids and claim certain benefits.
NICs are usually taken automatically by your employer and paid to HMRC, so you don’t need to do anything.
You can see how much NICs you pay on your wage slip.
Anyone working for themselves usually has to pay NICs themselves when completing a self assessment tax return.
What are the NIC thresholds and how much do I pay?
The threshold for NI payments is currently £12,570 a year for employed workers.
If you are employed, you start paying NI when you are 16 or older.
Most people now pay 10% NICs on any earnings between £242 and £967 a week.
Plus you have to pay 2% on anything you earn over £967 a week – or £4,189 per month.
Those earning less than these amounts do not have to pay any National Insurance.
The self-employed start paying when they make profits of at least £12,570 a year.
If you’re self-employed you need to complete a self-assessment tax return and pay NICs and income tax yourself.
The exact amount you pay will depend on how much you earn as it’s a percentage of earnings between these amounts.
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Meanwhile, those without the need to touch the extra cash from the NI cut right away have the unique opportunity to increase its worth.
Plus, millions of households are set to be hit with a £106 tax hike over the coming weeks, starting from tomorrow.
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