Thanks to changes to the National Insurance threshold that have just come into effect, everyone earning money through PAYE (in essence, workers who are employed rather than self-employed) will see a boost to their income of around £30 a month.
Announced by Chancellor Rishi Sunak in his Spring Statement, the changes now mean that the threshold at which workers start paying National Insurance has increased from £9,880 to £12,570. Essentially, you can now earn more before you have to pay National Insurance.
The threshold change will mean that some people no longer have to pay National Insurance and others will be paying less compared to the previous tax year.
The threshold change will remain in place, even though April's National Insurance increase will be reversed.
What does the change in National Insurance threshold mean for me?
According to The Treasury, almost 30 million workers will benefit from this change. Here’s a rough guide as to how the change affects you, based on your salary.
If you’re one of the 2.2 million people who earn less than £12,570, this change means you will be taken out of paying National Insurance altogether. You won’t pay income tax either, as the income tax threshold is also £12,570.
If your salary is £20,000 a year, you would have been taking home around £1,431 per month (after National Insurance and income tax had been deducted). But now the increased threshold is in effect, you can expect your take home pay to be closer to £1,461, which is an extra £30 in your pay packet each month. (Bear in mind that this figure is indicative. It doesn’t take into account any pension or other deductions so your actual figure may be different).
For those earning £35,000 a year, your take home pay is likely to increase from £2,265 to £2,295, which is again, an increase of about £30 each month.
Those on salaries of £55,000 will also see a £30 monthly increase in their take home pay - from £3,339 to £3,368 (again, excluding pensions and other deductions).
If you are self-employed, you will also benefit from the threshold change, but due to how you pay National Insurance, you won’t see the benefit until the start of the new tax year in April 2023.
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