MILLIONS of workers and self-employed Brits will receive a £900 wage boost in hours.
From Saturday, the main rate of National Insurance (NI) will be cut again, from 10% to just 8%.
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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.
It follows a two percentage point cut from 12% to 10% that came into effect in January.
When combined with the January reductions, it means 27million employees will get an average tax cut of £900 in 2024.
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And more than two million people will benefit from the main rate of self-employed National Insurance being trimmed down.
The main rate of Class 4 NI contributions for the self-employed will be reduced to 6%.
When combined with the abolition of the requirement to pay Class 2, this is expected to save a self-employed worker earning £28,000 about £650 a year.
To mark the record cuts to NICs, HMRC has launched an updated online tool to help people understand how much they personally could save on National Insurance this 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.
Spring Budget 2024: How income tax and National Insurance work (1)
Prime Minister Rishi Sunak said: “Hard work is one of my core values, and the progress we have made on the economy means we can reward work with a tax cut worth £900 for the average earner.
“This marks the next step in our plan to end the unfairness of double taxation of work by abolishing national insurance in the long term.”
Chancellor Jeremy Hunt said the cuts show “we stand behind those who work hard and fires the starting gun on our long-term ambition to end the unfair double tax on work”.
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.
The news comes after both the National Minimum and National Living wages are rising from this month too, meaning some people will be better off to the tune of £1,800 a year.
Plus, earlier this month the Chancellor outlined reforms to the high-income child benefit charge in a big boost for mums and dads.
These changes will also come in from April 6 and are expected to save hundreds of thousands of parents £1,300 a year.
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.
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
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.
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This post first appeared on thesun.co.uk
