If we’re on a low wage, the change could leave us hundreds of pounds better off
Workers could be in line for a tax break in summer as the threshold for paying National Insurance goes up.
Chancellor Rishi Sunak broke the news in the Spring Statement on his spending plans.
It means that, from July, we can earn £12,570 before we pay any National Insurance. That’s an extra £3,000 on top of what we can currently earn before paying.
But the rate of National Insurance is rising by 1.25 percentage points from this spring.
When we reach the new threshold, we’ll start paying at a rate of 13.25 per cent. This rate was previously just 12 per cent.
So what does this mean?
If we earn £15,000 a year, for example, we’ll be £330 better off as our contributions will fall from £652 to £322.
For those of us on Universal Credit (UC) as well as our earnings, the move is likely to cut the amount of UC we get.
This is because our UC is affected by how much we earn (known as the ‘taper rate’). As this change means we’ll be earning a bit more, our UC will come down.
What is National Insurance?
National Insurance is money we pay to the government from our earnings to contribute to the welfare state.
The money goes towards things like the state pension and other benefits. And paying it entitles us to more of certain ‘contribution-based’ benefits like Jobseeker’s Allowance.
It comes off our pay before we even get it – so we may not even be sure how much we have been paying.
And the rate is going up now to help the government pay for health and social care in the wake of the Covid pandemic.
Other money news
The other big story from the Spring Statement was the 5p per litre cut in fuel duty.
Filling up our cars, like other household costs, has been getting more and more expensive. In fact, fuel recently hit an all-time high, going up by 18p per litre in just one month.
But this cut should shave about £3.30 off the cost of filling a typical family car.
It has already come in and is due to stay in place until March 2023.
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