RISHI Sunak handed millions of workers a tax cut in his Spring Statement.
The threshold at which you start paying National Insurance will rise by around £3,000 from July, meaning you can earn more without paying the tax.
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And some people on low incomes will be taken out of the tax altogether.
But the surprise move follows an already planned hike to National Insurance rates of 1.25 percentage points from April.
It means some workers will be better off and save money by paying less tax, while others will still pay more.
Meanwhile, millions of drivers will pay less tax after the chancellor slashed fuel duty by 5p.
The cut will reduce the cost of filling up a tank by £3.30, on average, saving some money on annual fuel costs.
And that change to fuel duty has already been introduced at some petrol stations including those at Asda, Tesco and Sainsbury’s slashing petrol prices.
Mr Sunak also vowed to slash income tax and reduce the basic rate from 20p in the pound to 19p.
But that change is not coming until 2024, so you won’t benefit from it just yet, unfortunately.
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All in all, there’s a lot going on with changes to tax, which might leave you wondering whether you’re better off or not.
That’s why we’ve put together The Sun’s tax calculator, created with tax advisors Blick Rothenberg, to help you work out how much tax you’ll be paying and what your take-home pay will be.
You can find The Sun’s tax calculator here.
The calculator includes how much better off (or not) you’ll be after both changes to National Insurance from July onwards.
The more you earn, the less you gain from the National Insurance changes because the tax hike outweighs the raised threshold.
Around the £35,000 – £41,000 mark is the point where there is no net benefit whatsoever from the tweaks. But the exact amount depends on your circumstances.
How is tax changing in April?
National Insurance rates are different depending on how much you earn.
Currently the rates are 12% on earnings between £184 to £967 and over this amount 2%.
The April hike will hit the finances of around 25million Brits, who will have to pay 1.25 percentage points extra.
This means the new rates will be 13.5% and 3.25% respectively.
As the rates are a percentage of your earnings the exact amount more you’ll pay in cash terms will depend on your circumstances.
Currently, someone earning £15,000 a year pays contributions of £652, while another person earning an annual salary of £25,000 is taxed £1,852 each year.
On earnings of £15,000 the increase will mean paying an extra £68 a year, and for £25,000 and additional £193.
How is tax changing in July?
You pay National Insurance when you’re employed and earning more than £9,568 a year, or £184 per week.
That was already increasing slightly in April to £9,880 but will rise again further to £12,570.
Mr Sunak said in his Spring Statement announcing the change that it will be worth around £330 a year.
But that does not take into account April’s hike to rates.
Calculations reveal somebody earning £10,000 will be £11 better off in total.
While they will be £1 worse off because of the NICs hike, this is more than compensated by the raised thresholds, giving them £11 more.
Meanwhile a worker on £17,289, the National Living Wage, will be a total £242 better off after gaining £332 from the increased threshold and losing £90 in tax.
The self-employed will also get a tax cut from changes to National Insurance.
Those on lower incomes working from themselves could get a tax break of up to £165 a year.
The Lower Profits Limit which is the threshold at which you start paying self-employed NICs will rise from £9,880 to £12,570 from July.
Below this amount and you won’t have to pay Class 2 National Insurance Contributions.
The Class 2 contributions is a tax of £3.05 a week, and it’s usually payable by the self-employed with an income of more than the Small Profits Threshold of £6,515.
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