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Changes to the National Insurance Contributions (NICs) threshold will see 31m individuals receive a tax cut in April
The government has brought legislation to parliament to increase NICs thresholds by more than 10% for the next tax year.
The NIC threshold changes for 2020-21 set the level at which taxpayers start to pay NICs at £9,500 per year for both employed and self-employed people.
As a result, typical employee will save around £104 in 2020-21, while self-employed people, who pay a lower rate, will have £78 cut from their bill.
All the other thresholds for 2020-21 will rise with inflation, except for the upper NICs thresholds which will remain frozen at £50,000, as announced at Budget 2018.
Sajid Javid, Chancellor of the Exchequer, said: ‘We are determined to do what we promised and put more money into the pockets of ordinary hard-working people. That is why we are starting this government as we mean to go on, by cutting their bills.’
Government figures indicate the typical basic rate taxpayer now pays over £1,200 less income tax compared to 2010-11.
The threshold changes will not affect low earners’ entitlement to contributory benefits such as the state pension, with the lower earnings limit and small profits threshold, above which individuals start building entitlement to contributory benefits, rising with the CPI measure of inflation.
In addition to increasing the NICs threshold the government has said it will also end the freeze to working age benefits, which has been in place since 2016.
From April 2020 the majority of working-age benefits will be uprated in line with inflation.
The changes will be made through three separate SIs: The Social Security (Contributions) (Rates, Limits and Thresholds Amendments and National Insurance Funds Payments) Regulations 2020; The Social Security Benefits Up-rating Order 2020; and The Tax Credits, Child Benefit and Guardian’s Allowance Up-rating Regulations 2020.
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