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MORE than two million workers are set to pay zero tax thanks to a change coming within days.
New rules will see the amount you earn before you start paying National Insurance contributions (NICs) rise to £12,570.
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The threshold is set to increase from £9,500 and you should see the change in your first pay check from July 6.
The government say the change will see 2.2 million people out of paying National Insurance or income tax on their earnings at all.
This is because the threshold for paying income tax on the money you make is also £12,750.
If you earn less than this amount, you currently pay no income tax.
It comes as households are under pressure to keep up with rising costs from food and fuel to energy bills.
Writing exclusively for The Sun on Sunday, Prime Minister Boris Johnson said the measures will save 30 million workers as much as £330 a year.
It means around 70% of British workers will pay less National Insurance.
Chancellor Rishi Sunak has urged Sun readers to check how much they will see in their pay packet using the government’s handy tool.
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You can try it yourself by visiting the government’s website – you have to enter your annual salary.
It estimates that someone earning £15,000 a year stands to pay £338 a less NICs.
Meanwhile on an annual salary of £25,000, you stand to pay £244 year less, and on £35,000 your NICs will reduce by £150.
The exact amount of the cash boost depends on how much you earn and can be affected by other things, like bonus payments or salary deductions.
The increase to the National Insurance threshold comes into effect from July 6 and you should see it on your next payslip after this date.
The tax reduction will see workers paying on average £330 less NICs – and some will now pay no NICs at all.
What is National Insurance?
National insurance is a tax paid by workers above a certain level of earnings.
The contributions help fund benefits like the State Pension, sick pay and unemployment benefits.
All UK nationals receive an NI number (and NI card) automatically before they turn 16.
Your NI number helps the government track your earnings and charge the right amount of tax.
You currently pay National Insurance if you’re 16 and earn over a certain amount.
Workers currently pay 13.25% on earnings between £9,564 and £50,268 and a further 3.25% is paid on wages over that.
The tax is deducted from your wages each month and you can see how much you pay on your payslip.
Once you reach state pension age, you don’t need to pay National Insurance at all.National Insurance is not the same as income tax, and you pay this separately on your earnings too.
National Insurance works differently if you’re self-employed.
What is income tax?
Income tax is a cut of your earnings once they’ve reached a certain threshold.
There are different tax rates which increase with the money you earn.
There’s also the personal allowance, which means the first chunk of the money you make is entirely tax-free.
It can change from one year to the next and is set by the government.
In the current tax year – which runs from April 6 2021 to April 5 2022 – the figure is £12,570.
On earnings between £12,570 and £50,270, you pay the basic income tax rate of 20%.
Wages of £50,271 and above are taxed at the higher rate of 40%.
And the additional rate of income tax, which applies to earnings above £150,000, is 45%.
Chancellor Rishi Sunak confirmed in the October 2021 Budget that these income tax thresholds will be frozen until 2026.
