Skip to content
Home » News » Tax promises back on the agenda

Tax promises back on the agenda

In September, the government announced that employees will pay 1.25p more in the pound from their pay packet in National Insurance contributions from this April.

In a significant move, he has now said that the earnings threshold at which people start to pay National Insurance will rise.

At present, most workers start paying National Insurance contributions when their income hits £9,568. They pay 12% of earnings between £9,568 and £50,270, then 2% on any earnings above £50,270.

Now the chancellor has said, from July, National Insurance will be paid on income over £12,570 a year – the same level as income tax starts being paid.

In practice, the two measures will mean that anyone earning less than about £35,000 a year will pay less National Insurance during the year. That is about 70% of all workers. Those who earn more will see a tax rise, albeit smaller than they would have expected. 

  • For an employee earning £20,000 a year, it means an annual National Insurance cut of £180 in 2022-23, instead of an £89 rise expected before the announcement, according to accountancy firm Deloitte
  • For a £40,000 earner, it means a rise of £70, instead of a previously expected £339 rise
  • For a £60,000 earner, it means a £320 rise, instead of a previously expected £589 rise

Self-employed people, who pay at a different rate, will see slightly less of a benefit from the chancellor’s decision.

Over time, this threshold is frozen, which will steadily mean more low-earners will have to pay.

Early last year Mr Sunak said the thresholds at which income tax is paid would be frozen at April 2021 levels for five years (although Scotland has different levels). That means pay rises will push more people into higher tax bands.

At the end of his speech, he pledged to reduce the basic rate of income tax by 1p in the pound before the end of the Parliament in 2024.