As well as the huge headache of energy bills going through the roof over the next few months, people will also have to contend with a rise in national insurance contributions, and there is also the changes to the income tax allowance threshold which will bring millions of the workforce of the UK into the tax net.
Rise In NI Contributions To Fund Social Care & The NHS?
Here are the changes that are due to take place as copied from a recent article in The Guardian by Shane Hickey:
`From Wednesday, the controversial rise in national insurance contributions (NICs) will come into effect. Announced last year, the government says the increase is to fund social care and the NHS.
`Under the changes, both the employed and self-employed will pay 1.25p more in the pound. Employees will be charged 13.25% on earnings between £9,568 and £50,270 and 3.25% on income above that. For the self-employed, class 4 contributions will rise to 10.25% and 3.25%.
`However, there is some respite to come in July, when the threshold at which NICs start to be paid will rise from £9,880 to £12,570. Accountancy firm Blick Rothenberg says those earning up to £41,389 will be better off than they were in the last tax year, but their pay will dip before then with the new regime.
`Once your income exceeds that figure, you will still be worse off than in the 2021/22 tax year.
`For an employed worker earning £50,000, the effect of the two changes will be a decrease in take-home pay of about £200 a year.
`Tax on share dividends will also increase by 1.25 percentage points, which will particularly affect people who rely on dividends as part of their income.
`Investors can earn up to £2,000 before they are liable for tax. After that, basic-rate taxpayers will pay 8.75%, while for those on a higher rate it will be 33.75%. A basic-rate taxpayer who receives £10,000 in share dividends will pay £700 in tax, up from £600.
Income Tax Allowances
`In last year’s budget, chancellor Rishi Sunak announced that the personal allowance threshold would remain unchanged until 2026, instead of rising in line with inflation.
`This means the tax-free personal allowance remains at £12,570 for this year; above that threshold 20% income tax kicks in. The threshold for higher-rate income tax in England, Wales and Northern Ireland – when workers start paying 40% – has been frozen at £50,270.
`The effect will be to bring millions more workers into the tax net. As employees get pay rises, they will be pushed over the thresholds. If your employer has given you a rise to help you keep up with inflation, you might find less of it ends up in your pocket than expected.
`Steven Cameron, pensions director at Aegon says: “An individual earning £30,000 last year, who receives a pay rise of the national average 4.8%, will pay an additional £693 income tax in the coming year.”
If you need any help with your tax affairs please do not hesitate to get in touch with the team here at WHR Accountants on 028 3752 2909.