Millions of people could save over £100 per year after this April tax rule change
April 2020 will see the threshold for National Insurance Contributions (NICs) increase, which will subsequently see a change made to taxes. The good news is that millions of workers are set to save over £100 a year as a result.
National Insurance Contribution rise
NICs are set to rise from £8,632 to £9,500 from 6 April 6 2020.
This is the level at which taxpayers begin to pay national insurance, which in turn means around 31 million workers - including those who are both full-time and self-employed - will get a tax cut worth up to £104 a year.
The Government announced that a typical full-time employee will save around £104 in the year 2020-21. In comparison, self-employed workers, who pay a lower rate, will see £78 cut from their tax bill.
As announced in the 2018 Budget speech, all the other thresholds for 2020-21 will rise with inflation, except for the upper NICs threshold. This will remain frozen at £50,000.
However, these threshold changes will not affect low earners' entitlement to contributory benefits, including the State Pension, with the Lower Earnings Limit and Small Profits Threshold.
The Government will also end the freeze on working age benefits, which has been in place since 2016. The majority of working-age benefits will be uprated in line with inflation from April 2020.
Since 2010, personal allowance - which is the level at which people start paying income tax - has risen from £6,475 to £12,500 since 2010.
In less than a decade, this is an increase of over 90 per cent. Compared to 2010-11, the typical basic rate taxpayer now pays over £1,200 less income tax.
‘Put more money into the pockets of ordinary hard-working people’
Chancellor of the Exchequer, Sajid Javid, said, "We’re determined to do what we promised and put more money into the pockets of ordinary hard-working people. That’s why we’re starting this government as we mean to go on, by cutting their bills.
"We want everyone to feel that they can contribute to the new chapter we are opening for the economy and our country, because under this Government work will always pay."