MILLIONS of hard-up households are set for a £330 pay boost within weeks as the National Insurance cut will still go ahead.
Chancellor Jeremy Hunt today announced several U-turns on tax cuts in an effort to calm markets after the fallout of the mini-Budget.
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Mr Hunt ripped up the planned 1p cut to the basic tax rate indefinitely, as well as scrapping VAT for foreign tourists visiting the UK and freezing alcohol duty rates from next year.
Scrapping the National Insurance hike is one of only a few policies that has survived, as Liz Truss attempts to save her premiership.
The previously announced cut to Stamp Duty is also set to remain in place.
The 1.25 percentage point rise in National Insurance which took effect in April will still be reversed on November, as announced in the mini-Budget last month.
Around 28 million workers across the UK are set to keep an extra £330 a year on average.
Lower earners, on less than £12,570 a year, won’t benefit from the change.
That’s because you don’t pay any tax under this amount which is your tax-free personal allowance.
Meanwhile, 920,000 businesses will keep almost £10,000 on average.
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National Insurance is paid by employees over the age of 16 and earning above £242 a week.
It’s also paid by self-employed Brits making a profit of £6,725 or more a year.
Most employees will see the tax cut in the November pay packet, but some will see it backdated in December or January.
How much will you save?
The exact amount that you will save will depend on how much you earn.
Personal finance specialists at Hargreaves Lansdown have worked out how much people will save based on their earnings.
- Workers on £20,000 will save £93 a year
- Workers on £30,000 will save £218 a year
- Workers on £40,000 will save £343 a year
- Workers on £50,000 will save £468 a year
- Workers on £60,000 will save £593 a year
- Workers on £80,000 will save £843 a year
- Workers on £100,000 will save £1,093 a year
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 automatically before you turn 16.
This number allows the government to track your earnings and apply the right amount of tax.
Who currently pays it?
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 £6,725 or more 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 and how much you earn, and whether you have any gaps in your National Insurance record.
What are the thresholds and how much do I pay?
The threshold for National Insurance payments is currently £12,570 a year for employed workers and £6,725 for self-employed people.
At the moment, most people pay 13.25% on anything they earn between £242 and £967 per week. You have to pay 3.25% on anything you earn over £967 a week.
From November 6, most people will pay 12% on anything earnings between £242 and £967 a week.
