At the Spring Statement in March, the Chancellor increased National Insurance thresholds for the 2022-23 tax year. This means employees and self-employed people will pay National Insurance contributions on less of their income or profits.
The threshold will increase by £2,690 from the current £9,880 to £12,570 from 6 July 2022, equalising the NICs and income tax thresholds for the first time, and potentially pointing towards a merger of income tax and NICs into a single threshold.
The rise in the threshold will cut tax by an average £330 per worker although the introduction three months into the new tax year means that the actual average saving will be £267.
This means that the primary threshold rises from £190 to £242, while the upper earnings limit remains unchanged at £967. All employees pay a lower rate of National Insurance above this point.
Following the introduction of health and social care levy, employees will pay National Insurance at 13.25%, representing a 1.25% surcharge on employees and employers from 6 April 2022.
However, the tax burden is still at its highest for 40 years, as the Chancellor has frozen the base tax-free allowance for three years until 2025-26.
With the prime minister under pressure from backbench MPs, there have been calls for a cut in taxes, with a possible earlier introduction of the proposed reduction in the base income tax rate to 19%. However, reverting to the annual adjustment to the tax-free personal allowance would be popular as the cost of living crisis hits low to middle earners.
