Millions of people will pay more tax on income this year, despite Chancellor Rishi Sunak lauding next week’s increase to the National Insurance threshold as an effective “tax cut”.
On July 6, the NI threshold will rise from £9,880 to £12,570, meaning 30 million people will pay less tax, while around 2.2 million will be taken out of paying NI entirely.
However, people earning £50,000 or more will still pay more in NI contributions this year than in the 2021-22 tax year.
Sean McCann, Chartered Financial Planner at NFU Mutual, said the increase to NI contributions will affect the “squeezed middle” who already have to contend with frozen income tax thresholds and the withdrawal of child benefit.
Because of the Chancellor’s decision to keep tax thresholds frozen until 2026, workers earning £30,000 will fork out an extra £1,816 in income tax and NI over the next five years, investment platform Interactive Investor has calculated.