CASH BOOST Millions to get pay rises in wages in DAYS due to tax cut – check how much will you get
MILLIONS across the UK have received a pay rise this month and many will start seeing that money in days.
The Government slashed the National Insurance (NI) contributions from 10% to 8% for UK workers.
Many households will start noticing the difference soon as workers reach the first monthly payday since the change came into force in April.
It is estimated the changes will affect more than 27million working people in the UK.
The average worker earning a salary of £35,400 a year will save £450 while some could see their pay boosted by as much as £754.
A number of low-income earners will not see a change as they earn £242 or £12,570 a year so won’t be paying NI.
Those over the state pension age, currently 66, also won't see a change from this month's NI cut.
It comes after ministers cut the same rate of NICs from 12% to 10% in January this year.
The Government says the two combined cuts will save a worker on £35,400 about £900 a year.
What is National Insurance?
National Insurance is a tax on your earnings which is used to fund state benefits.This includes the state pension, statutory sick pay, maternity leave and unemployment benefits.If you are a UK national, you should receive an NI number and card automatically before you turn 16.
This number allows the Government to track your earnings and apply the right amount of tax.
Who pays National Insurance?
You pay National Insurance if you’re 16 or over and either:
- an employee earning above £242 a week
- self-employed and making a profit of £6,725 or more a year
- If you're employed, NICs are taken out of your monthly salary, but self-employed people have to pay it through self-assessment.
You can see your contributions if you're employed by looking at your pay slip.
Once you reach state pension age, you don't need to pay it.
There are different types of National Insurance - known as "classes" -and the type you pay depends on your employment status and how much you earn, and whether you have any gaps in your National Insurance record.
What are the current NIC thresholds and how much do I pay?
The threshold for National Insurance payments is currently £12,570 a year for employed workers and £6,725 for self-employed people.
A change in April 2022 saw millions of workers paying 1.25% more NI, but that hike was reversed from November of the same year, saving workers £330 a year on average.
But rates fell from 13.25% to 12% and from 3.25% to 2% - the same as before April 2022.
Most people now pay 12% NICs on any earnings between £242 and £967 a week.
Plus you have to pay 2% on anything you earn over £967 a week - or £4,189 per month.
Those earning less than these amounts do not have to pay any National Insurance.
Your pay will depend on how much you earn, as it's a percentage of earnings between these amounts.
Can I check how much National Insurance I've paid?
You can check how much National Insurance you've paid by visiting https://www.gov.uk/check-national-insurance-record.
You will need a login and password to do this.
If you do not have a login to the Government Gateway portal, you can set one up, but will need your National Insurance number to do so.
You can check how much you have made in contributions during the current financial year, and check how many National Insurance credits you have received.
However, this portal will not give you an estimate of how much of the state pension you are entitled to.
What can I do with the extra earnings?
For some, the NI cut is much needed and extra earnings will need to be put towards bills, rent or other essential expenses.
But there are ways you can turn the extra earnings into more money which will benefit you in the long term.
You could choose to add the extra earnings from the NI cut into a workplace pension.
If you earn the UK average salary of £35,000, the NI cut will save you £900 in a calendar year.
Once put into a pension, over 35 years, this could produce a pot of £52,861.
The younger you are when you start the more you will benefit from this savings hack.You might also decide to use the extra money to overpay on your mortgage to slice off a few years of repaying.
Before overpaying on your mortgage, make sure to check you won't be hit with any early payment fees.
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