Here’s a look at everything you need to know. What happens? Starting NI thresholds will rise from £9,880 to £12,570 from 6 July, meaning many people will see more money in their pay packets from this month. Will I be better? This depends on how much you earn and whether it was enough to cover the previous limit. Almost 30 million workers will benefit, with a typical worker saving more than £330 a year from July, according to the government. However, the cut follows a 1.25 percentage point rise in NI in April to help pay for health and social care. The Government says that seven in 10 workers paying National Insurance Contributions (NICs) will pay less, even after the health and social care contribution is taken into account. But with the cost of everyday purchases such as food and fuel rising sharply, some households may not feel better off in practice, even with more money in their pay packet. Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “The lowest will pay less and the highest will pay more than before April.” According to Hargreaves Lansdown, someone earning £20,000 would have had a monthly NI bill of around £104 before April, which has since risen to £112 and will drop to around £82 after July’s changes. Someone on £30,000 would have paid around £204 a month before April, then rising to £222 and will now see that drop to around £192. On a salary of £40,000, they would have paid around £304 a month before April and would see that rise to £333. Their payment will now drop to around £303. Someone on £50,000 will pay around £413 a month from July, up from around £404 before April, and someone earning £60,000 will pay around £443 from July, up from £423 before April, according to Hargreaves Lansdowne. What else has happened to citizens’ taxes? Recent figures have shown that more people are drifting into higher tax brackets as their wages rise over time. According to HM Revenue and Customs figures, around 6.1 million taxpayers are set to pay tax rates at the top rate of 40 per cent or the additional rate of 45 per cent in 2022-23. Back in 2019-20, the total number of higher rate and additional rate taxpayers combined was close to 4.3 million. As well as being dragged into higher tax brackets, many people’s pay rises are falling well short of inflation, which is expected to top 10 per cent in the coming months. This means that the “spending power” of their wages is being eroded in real terms. The government has also previously said that taxpayers will gain £175 on average thanks to a cut in the basic rate of income tax in 2024. How else could I save taxes? Hargreaves Lansdown suggests considering Isas, including a lifetime Isa if you’re saving for your first home. Payments into pensions also attract tax relief and the first 25 per cent taken from the pension is usually tax-free. Some people will also qualify for marriage benefit, says Hargreaves Lansdown. Under certain conditions, the lowest earner can ask to transfer one-tenth of their personal allowance to the highest earner, so they pay tax on less of their earnings. Becky O’Connor, head of pensions and savings at interactive investor, also suggested that people could consider any salary sacrifice arrangements offered by their employer. He said: “Salary sacrifice involves exchanging part of your salary for other benefits such as bikes, an electric car lease or your pension. “It reduces your reported salary for income tax and national insurance purposes, so if you use it, it means the amount you pay will have to go down.” What other cost of living is in its way? Support that is both widespread and targeted at specific groups that may be particularly struggling will increase as 2022 continues, with a difficult winter ahead. More than 8 million households will start seeing cost of living payments in their bank accounts on July 14, when a first installment of £326 will start being paid to low-income households on benefits. The second part of the £650 lump sum payment will follow this autumn. Pensioner households will receive £300 to help cover winter costs, while people on disability benefits will receive an extra £150. Households in general will also have £400 shaved off their energy bills.
