31 million people to benefit from a tax cut, as National Insurance contributions thresholds to rise to £9,500 per year.
The government has recently set out the National Insurance thresholds for 2020-21, with the level at which taxpayers start to pay NICs rising by more than 10 per cent to £9,500 per year for both employed and self-employed people.
A typical employee will save around £104 in 2020-21, while self-employed people, who pay a lower rate, will have £78 cut from their bill.
Ministers have pledged that the rates of income tax, National Insurance and VAT will not rise, and the government has set out an ambition to raise the National Insurance thresholds to £12,500, putting almost £500 a year into people’s pockets.
All the other thresholds for 2020-21 will rise with inflation, except for the upper NICs thresholds which will remain frozen at £50,000, as announced at Budget 2018.
In addition to increasing the NICs threshold, the Government will also end the freeze to working age benefits, which has been in place since 2016. From April 2020 the majority of working-age benefits will be uprated in line with inflation.Since 2010 the personal allowance has risen from £6,475 to £12,500Since 2010 the personal allowance, the level at which people start paying income tax, has risen from £6,475 to £12,500, an increase of over 90% in less than a decade. The typical basic rate taxpayer now pays over £1,200 less income tax compared to 2010-11.
The threshold changes will not affect low earners’ entitlement to contributory benefits such as the State Pension, with the Lower Earnings Limit and Small Profits Threshold, above which individuals start building entitlement to contributory benefits, rising with the CPI measure of inflation.
The changes will be made through three separate SIs laid on 30 January 2020: “The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2020” ; “The Social Security Benefits Up-rating Order 2020” ; and “The Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2020”.
Source: My Taxes Plus