National Insurance threshold raised meaning tax cut for 31m – what is new threshold?
The main personal finance pledge in the Tory election manifesto was the increase in the National Insurance threshold, meaniang a tax cut for over 30 million workers. But what is the new NI threshold according to today’s budget.
What is National Insurance?
National Insurance contributions are paid out of your wages- monthly, weekly, or another period depending on your employer’s arrangements.
Currently, you begin paying National Insurance when your income reaches a certain amount.
Find out how much you pay here
READ MORE- National Insurance: What is the new NI threshold?
Who pays National Insurance contributions?
Both employed and self-employed workers pay National Insurance contributions.
How much you pay depends on your employment status and how much you earn.
Contributions go towards your state pension, along with other benefits.
You pay Class 1 National Insurance contributions if you have an employer, or if you’re self-employed but work for an employer.
In this case, your Nationa Insurance tax will come out of your payslip.
Employers make contributions to employee’s National Insurance tax, but this depends on how much they are paid.
Self employed people need to pay tax as part of their self-assessment.
What is the current NI threshold?
The current threshold sees workers paying National Insurance contributions once they earn £8,632 a year.
This is the equivalent of £166 a week- if you earn less than that you do not pay National Insurance contributions at the moment.
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What is the new NI threshold?
During the election, Boris Johnson said a Conservative government would ensure “low tax for working people”.
The party promised to put up the National Insurance threshold, confirming to the BBC that it would be raised to £9,500 this year, with gradual increases during the parliament.
This policy could mean a reduction of £460 for everyone earning more than the current threshold.
What does the new NI threshold mean?
The PM said bringing this threshold in would “help with the cost of living” and “put £500 in the pocket of everybody”,
This would mean the level at which taxpayers start paying National Insurance contributions will rise by over 10 per cent.
All other thresholds for the year will rise with inflation.
Chancellor Rishi Sunak will deliver the Budget in Parliament today, so figures could change for the 2020/2021 financial year.
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