Many people will see more money in their pay packets from this month
Some people’s payslips may look better in July than they did last month, as the threshold at which national insurance (NI) kicks in will be raised from Wednesday.
Here is a look at everything you need to know.
NI starting thresholds will rise from £9,880 to £12,570 from 6 juli, meaning many people will see more money in their pay packets from this month.
Will I be better off?
That depends on how much you earn and whether it was enough to meet the previous threshold. Nesten 30 million working people will benefit, with a typical employee saving more than £330 in the year from July, ifølge Myndighetene.
derimot, the cut follows a 1.25 percentage point increase to NI in April, to help pay for health and social care.
The government says seven in 10 workers who pay national insurance contributions (NICs) will pay less, even after accounting for the health and social care levy.
But with the cost of everyday purchases such as food and fuel rising sharply, some households may not feel better off in practice, even with more money in their pay packet.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, sa: “Lower earners will pay less, and higher earners will pay more than they did before April.”
According to Hargreaves Lansdown, someone earning £20,000 would have had a monthly NI bill of around £104 before April, which then rose to £112 and will drop to around £82 following the July changes.
Someone on £30,000 would have paid around £204 per month before April, then rising to £222, and they will now see this fall to around £192.
On a £40,000 salary, they would have paid around £304 per month before April and seen this rise to £333. Their payment will now fall to around £303.
Someone on £50,000 will pay around £413 per month from July, up from around £404 before April, and someone earning £60,000 will pay around £443 from July, up from £423 before April, according to Hargreaves Lansdown.
What else has been happening with people’s tax payments?
Recent figures have shown that more people are being dragged into higher tax bands as their wages rise over time. According to HM Revenue and Toll tall, rundt 6.1 million taxpayers are projected to be paying income tax rates at the higher rate of 40 per cent or the additional rate of 45 prosent i 2022-23.
Tilbake i 2019-20, the total number of higher rate and additional rate taxpayers combined was approaching 4.3 million.
On top of being dragged into higher tax bands, many people’s pay rises are falling significantly short of inflation, which is expected to exceed 10 per cent in the coming months. This means the “spending power” of their wages is being eroded in real terms.
The government has also previously said that taxpayers will gain £175 on average thanks to a cut in the basic rate of income tax in 2024.
How else could I save on tax?
Hargreaves Lansdown suggests considering Isas, including the lifetime Isa if you are saving for your first home. Payments into pensions also attract tax relief, and the first 25 per cent taken from the pension is usually tax-free.
Some people will also qualify for the marriage allowance, Hargreaves Lansdown says. Subject to certain conditions, the lower earner can apply to transfer a tenth of their personal allowance to the higher earner, so they pay tax on less of their income.
Becky O’Connor, head of pensions and savings at interactive investor, also suggested people could consider any salary sacrifice arrangements offered by their employer.
Hun sa: “Salary sacrifice involves exchanging some of your salary for other benefits, such as bicycles, electric car leasing or your pension.
“It reduces your quoted salary for income tax and national insurance purposes, so if you use it, it means the amount you pay should fall.”
What other cost of living support is on its way?
Support that is both widespread and targeted at specific groups who may be particularly struggling will build as 2022 goes on, with a tough winter expected ahead.
Mer enn 8 million households will start to see cost of living payments hit their bank accounts on 14 juli, when a first instalment of £326 will start to be paid out to low-income households on benefits.
The second portion of the one-off £650 payment will follow this autumn.
Pensioner households will receive £300 to help them cover winter costs, while people on disability benefits will receive an extra £150.
Households generally will also have £400 shaved off energy bills.