Nick Bustin, Director of Employment Tax at haysmacintyre, said:
“For the Government to raise National Insurance in April and then effectively cut it three months later is certainly rather odd. This change in the threshold, which is said to benefit 30 million people, is clearly a knee-jerk response to mitigate the 1.25% rise.
“While those earning under £40,000 will be better off overall, make no mistake, these changes are complex – particularly for employers who are having to manage them through PAYE. It means an employee who has remained on the same salary between March and July will have paid three different amounts in NI.
“To highlight the complexities around these changes we’ve calculated some examples. Last year, a person earning £20,000 would have paid £104 per month in NI contributions, in April that figure rose to £112 but it will now fall to £82. Somebody earning £30,000 will pay £30 less than last month which is £12 less than in March. However, someone earning £70,000 will now pay £467 per month, up from £439 before April – although less than the £499 they’ve paid over the past few months.
“While it’s important to welcome anything that puts more money in people’s pockets, particularly in the current climate, it’s clear that this change is not the silver bullet which will ease the cost of living crisis.”
