MORE than 27million workers are in line for a £450 wage boost thanks to a fresh National Insurance cut.
The reduction has been confirmed today by The Chancellor as part of the Spring Budget.
Chancellor Jeremy Hunt has confirmed a reduction in National Insurance
More than 27million workers are in-line for a £450 wage boost
Jeremy Hunt has outlined the financial plan for the rest of the year, including changes like tax hikes, cuts and benefit increases.
As part of today’s announcement, Mr Hunt revealed a 2p cut to National Insurance (NI) that will come into effect in a matter of weeks.
This change will help millions of workers and it means that someone earning an average salary of £35,000 will save over £448.60 a year.
This increases to a maximum of around £750 for those on salaries above £50,000.
The legislation is being brought in next week to enable the cut to come in from April 6 – the start of the next tax year.
In addition, self-employed National Insurance will also slashed from 8% to 6% saving an average of £350 a year.
Speaking in the House of Commons, Jeremy Hunt said: “From April 6, employees National Insurance will be cut by another 2p, from 10% to 8%.
“And self-employed national insurance will be cut from 8% to 6%.
“It means an additional £450 a year for the average employee or £350 for someone self-employed.”
Combined with the two percentage points cut to NI that came into effect in January, this will be a total saving of £900 a year.
The chancellor added: “When combined with the autumn reductions, it means 27million employees will get an average tax cut of £900 a year and two million self-employed a tax cut averaging £650.
“Changes that make our system simpler and fairer. And changes that grow our economy by rewarding work.”
National Insurance is a tax on your earnings that goes towards state benefits like state pension, statutory sick pay, maternity leave and unemployment benefits.
It comes after speculation had been rising in recent weeks that Mr Hunt would make NI or Income Tax cuts.
The Chancellor has been under pressure to press ahead with sizable giveaways in the Budget in a bid to get Britain growing.
The giveaway could have come as a cut to Income Tax, but The Chancellor has opted to slash NI instead.
The announcement today does mean that pensioners will miss out on any savings because NI is not paid by those over the state pension age, which is currently 66.
But finance experts and economists have previously warned that frozen income tax thresholds, which have been pushing people into higher tax brackets, will offset the NI boost for many people.
Sean Cockburn, tax director at Mazars, said: “While this is good news, there were glaring omissions.
“No news on income tax thresholds means that the sting of higher rate tax brackets will continue to pain workers, with many more dragged in, and there was no mention of personal allowance thresholds.
“This could have been the Budget that was used to simplify the tax system.”
What is the Budget?
THE Budget is big news and where you’ll often hear announcements about taxes. But what exactly is it?
The Budget is when the Government outlines its plans for the economy including taxation and spending.
The Chancellor of the Exchequer delivers a speech in the House of Commons and announces plans for things like tax hikes, cuts, and changes to Universal Credit and the minimum wage.
At the same time, the Office for Budget Responsibility (OBR) publishes an independent analysis of the UK economy.
Usually, the Budget is a once-a-year event and usually takes place in the Autumn, with a smaller update known as the Spring Statement.
But there have been exceptions in recent years when there have been more updates, or the announcements have taken place at different times, for example during the pandemic or when there is a General Election.
On the day of the Budget, usually a Wednesday, the Chancellor is photographed outside No 11 Downing Street with the red box.
He then heads to the House of Commons to deliver his speech, at around 12.30 following Prime Minister’s Questions (PMQs).
Changes announced in the Budget are sometimes implemented the same day, while others may not have a set date.
For example, a change to tobacco duty usually happens on the same day, pushing up the price of cigarettes.
Some tax changes are set to come in at the start of a new tax year, which is April 6.
Other changes may need to pass through Parliament before coming into law.
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 before you turn 16, but you may have to apply.
This number allows the government to track your earnings and apply the right amount of tax.
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 any gaps in your National Insurance record.
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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