Budgets are like buses these days. After waiting ages for one to come, he has two arriving at the same time, making tax harder to track. But one of the few decisions Kwasi Kwarteng made was to reverse the April National Insurance premium hike. Today, tax cuts come into effect and next year he will see nearly 30 million people receive an extra £330 on average.
Last year, the Boris Johnson government announced that the NIC would rise by 1.25 pence in pounds on April 6th of this year. It was billed as a health and social care levy that raises billions of dollars to fund social care and address the NHS backlog that has built up due to the Covid pandemic. You agreed to increase your employee’s NIC prime rate from 12% to 13.25% while your master was told to pay 15.05%.
It was highly controversial at the time for breaking a clear Conservative manifesto promise not to raise VAT, income tax or national insurance. Did. This was one of the few decisions his successor, Jeremy Hunt, could not undo, trying to calm the financial storm unleashed by his predecessor’s extremists. schedule.
Who pays for National Insurance?
Employees pay NICs for payroll and income tax, but employers also make contributions to employees. Self-employed people pay taxes on their profits. The NIC raises a significant amount of money to finance the Treasury (he made £158bn last year, according to HMRC), which is used to cover the costs of entitlements and public pensions. Workers are not required to make contributions until they are at the level of £12,570 a year at which income tax begins to be levied.
What is Komon?
Since the beginning of April, workers and employers have paid a surcharge of £1.25 pence. Liz Truss’ government decision to rescind that increase returns her NI rate to 12%. This is paid at this rate by employees who earn from £12,570 a year to just over her £50,000. Above that level, the rate returned from 3.25% to 2.0%. Most employees will start receiving the cuts on her November payslip through her employer’s payroll, but for some employees it could be her December or her January.
what does that mean to me?
This reversal set the clocks back seven months. Analysts say that if you go back to his original NIC rate, someone with £20,000 a year would be £93, someone with £40,000 would be £343, someone with £60,000 would be £593, and someone with £100,000 would be £100,000. saves £1,093.
The government expects this reversal, combined with a decision over the summer to raise the tax start threshold (from £9,880 to £12,570 a year), will make the average worker £500 next year as the cost of living crisis worsens. Good deal.