National Insurance and how it effects workers
Here's the fortnightly Barwell's Banter column by Nickie Barwell of Barwell Accountants, Wisbech...
During his Spring Statement, the Chancellor didn’t postpone the 1.25% national insurance rise which will come into effect on April 6, 2022.
However, he did announce that the Primary Threshold and the Lower Profits Limit will both increase to £12,570 from July 2022.
This will align the threshold for class 1 and 4 national insurance with the personal allowance.
This increase in the threshold equates to a saving of £330 for a typical employee and is estimated to benefit nearly 30 million working people.
The Treasury expects 70% of those who pay National Insurance Contribution (NIC) will pay less of it from July 6, 2022, with a further 2.2 million people expected to be taken out of paying NIC altogether.
Some basic examples of how this will effect workers are:
- Salary of £20,000 will pay £178 less NIC from 06.07.22 compared with 2021/22.
- Salary of £30,000 will pay £53 less NIC from 06.07.22 compared with 2021/22.
- Salary of £40,000 will pay £71 more NIC from 06.07.22 compared with 2021/22.
The Employers Allowance will increase to £5000 from April 2022 and continues to be limited to employers with an employers NIC bill below £100,000 in the previous tax year.
The basic rate of income tax will reduce to 19% but this is not until April 2024.
The current rate is 20% paid on earnings between £12,571 and £50,270 per annum.
The change means that someone earning £25,000 a year will pay roughly £125 a year less in income tax.
Homeowners investing in energy saving materials such as heat pumps, solar panels and insulation will benefit from 0% VAT for the next five years.
It has previously been 5%.
A temporary UK wide 12 month cut to duty on petrol and diesel of 5p a litre was also announced and came into effect at 6pm on March 23, 2022 and is being reported as the biggest cut ever on fuel duty rates by the Treasury.
Finally, an additional £500 million will be put into the Household Support Fund.