Millions to get a tax cut as national insurance threshold rises to £9,500
The Treasury is to raise the National Insurance threshold for 2020/21, saving the average employee around £104.
According to legislation approved in Parliament back on 30 January 2020, the £8,632 threshold at which employees start paying class 1 national insurance contributions (NICs) will increase by more than 10% to £9,500.
The same £9,500 threshold will apply to the self-employed who pay class 2 or class 4 NICs in 2020/21, reducing their annual bills by an estimated £78.
Government figures indicate a typical basic-rate taxpayer will be £1,200 better off in 2020/21, compared to 2010/11, due to this measure and previous increases to the personal allowance.
Prime Minister Boris Johnson first announced the Conservatives would raise the NICs threshold in November 2019 as part of his election campaign.
Johnson said that increasing the class 1 NICs threshold would “represent a tax cut for around 31 million workers”.
In January 2020, more than 32.9m people were in employment while the UK’s self-employed population passed the five-million milestone at the same time.
Ministers confirmed the upper NICs threshold is to remain at £50,000, while the main NICs rates will also be unchanged from 6 April.
The Government plans to raise the National Insurance threshold to £12,500 in the coming years, a move it claims will put almost £500 a year into people’s pockets.
Speaking before he quit last month, former chancellor Sajid Javid said:
“We’re determined to do what we promised and put more money into the pockets of ordinary hard-working people.
“That’s why we’re starting this Government as we mean to go on, by cutting their bills.”
Changes to the National Insurance threshold would not affect people’s entitlement to the state pension.
All NICs go into the National Insurance Fund, which pays state benefits, including the state pension.
See our budget update document for the latest information on this.
For further information on the National Insurance threshold rise, please contact Gemma Hedges on 023 8046 1259.