National Insurance rise reversed
Employees will see a cut in their National Insurance contributions this month following the reversal of the rise in National Insurance announced in April
National Insurance contributions rose by 1.25% in July for employees and employers under the new health and social care levy designed to raise up to £14bn to fund social care and deal with the NHS backlog following the Covid pandemic.
Following this, since the start of July, workers and employers have been paying an extra 1.25p in the pound.
However, the measure, which was introduced by Boris Johnson’s government, was reversed by former chancellor Kwasi Kwarteng in his mini Budget in September.
It is one of the few economic policies planned by Liz Truss and Kwarteng that has not been scrapped by new chancellor Jeremy Hunt.
The NI cut will be worth an extra £330 on average in 2023-24 affecting almost 28 million people across the UK, while 920,000 businesses will save an average of £10,000.
Working people across the UK will begin receiving the tax cut in their payslips this month via their employer’s payroll, though for some it could be December or January.
The reverse follows the rise in National Insurance thresholds in July, which aimed to lift 2.2 million of the poorest people in the UK out of paying the tax.
All workers earning over the annual national insurance threshold of £12,570 will see a fall in their national insurance bill in November compared to July. Above that level, the rate has gone back down from 3.25% to 2%.
Taken together, the higher thresholds and the Levy reversal means that almost 30 million people will be better off by an average of £500 in 2023-24.
Funding for health and social care services will be maintained at the same level as if the levy were in place.
- Published in National Insurance
Treasury pushes online tool to flag National Insurance cut
he Treasury has launched an online tool to show how take home pay will be affected by the upcoming changes to the National Insurance threshold from July
The tax cut represents a £6bn cut to National Insurance effective from 6 July and is worth an average £175 a year to taxpayers and will go some way towards offsetting the 1.5% increase introduced through the social care levy, which came into effect on 6 April.
The online checker will use salary information for employees who are paid through PAYE system, giving personalised estimates of how much they could save because of the government’s changes. All you have to do is enter your current salary before tax and it calculates the estimated saving depending on earnings.
The cut, which will see the point at which people start paying National Insurance rise to £12,570, is worth up to £330 and seven in 10 workers will pay less National Insurance even after accounting for the health and social care levy, the Treasury said.
From July, employees who earn £36,600 or under will pay less National Insurance. For example, a taxpayer earning average salary of £31,285 will pay £185 less over the nine-month period.
Everyone who pays National Insurance will see a tax cut, and the tool will show that employee earning up to £51,000 will see this cut more than offset the impact of the health and social care levy. This means the majority of working people will see a boost to their take home pay.
The tool estimates how much National Insurance an employee paid from July 2021 to June 2022 at the old rate and compares it with how much they will pay from July 2022 and June 2023. However, it is not suitable for every situation and does not provide a calculation of an individual’s National Insurance contributions liabilities.
Chancellor Rishi Sunak said: ‘With our historic £6bn National Insurance tax cut just weeks away, this new tool will show hard-working Brits how much more of their pay will be going directly into their pocket.
‘This tax cut, combined with £400 off energy bills and direct payments of £1,200 to eight million families, will help shield people from rising prices.’
Alongside this tool, the government has also launched a new financial support and benefits checker tool. It enables people to answer 10 simple questions to find out what support they might be eligible for by cross-checking against 25 individual benefits and support offers. This should help people find out what support they may be eligible for that they may currently not be accessing and is part of the government’s drive to help people manage the increased cost of living.
This first version of the financial support and benefits checker tool includes a selection of benefits and other sources of financial support, such as childcare support, job seeker’s allowance, budgeting loans and housing benefit. However, it does not include information about pension credits which are underclaimed by an estimated 1.3m pensioners.
A wider range of options will be included in another version in the next few months.
- Published in National Insurance