Martin Lewis discusses the National Insurance increase
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The Chancellor announced in his Spring Statement that he was going to increase the bracket of where people start to pay National Insurance from £9,880 to £12,570 which comes into effect on July 6. Launched today, the online checker will use salary information from PAYE to give employees personalised estimates of their take-home pay each month. The figure shown will be an estimate of a worker’s pay after Income Tax and National Insurance Contributions (NICs) is taken out.
It will also estimate how much tax and National Insurance a worker would pay from July 2021 to June 2022 and compares it with how much they would pay from July 2022 and June 2023.
The Treasury stated that the tool will “help people budget” during the cost of living crisis.
According to the Chancellor, the increase to the threshold, which is now in line with Income Tax, amounts to a tax cut of around £330 a year for workers.
He also added that seven out of 10 people will be paying less for National Insurance from July even with the 1.25 percentage point increase to the contributions.
The increase to National Insurance for workers and businesses was announced in September 2021 and will become a separate tax called the Health and Social Care Levy.
The Government states that the levy will directly fund the NHS and help clear the backlog which had occurred during the COVID-19 pandemic.
Each year the levy is expected to raise around £12billion for the Government.
Over the next three years, the Department for Health and Social Care expects the levy to provide nearly £40billion of funding for the NHS.
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Chancellor of the Exchequer, Rishi Sunak, said: “With our historic £6billion National Insurance tax cut just weeks away, this new tool will show hard-working Brits how much more of their pay will be going directly into their pocket.”
“This tax cut, combined with £400 off energy bills and direct payments of £1,200 to eight million families, will help shield people from rising prices.”
Alongside the online tool, the Treasury has also launched a New Financial Support and Benefits Checker Tool.
This tool aims to help people find Government financial support that they could be eligible for.
The benefits tool asks a person 10 questions and cross-checks against 25 individual benefits and support offers.
The financial support that people will be shown includes childcare support, Job Seeker’s Allowance, budgeting loans and housing benefit.
A wider range of benefit options will be included in a later version of the tool which will come out in the next few months.
Both tools will be on the Government’s GOV.COM Cost of Living page and will go live mid-morning today.
The Health and Social Care Levy caused a backlash when it was first announced as many argued that low-income earners were going to be even worse off financially.
The increase to the thresholds however means that around two million lower earners will be pulled out of paying the tax altogether.
The Chancellor also announced in his Spring Statement that he was going to cut Income tax by one pence in April 2024.
The Treasury says that this will benefit around 30 million taxpayers by an average of £175.
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