The new Chancellor, Rishi Sunak, has confirmed a Conservative manifesto promise to increase the National Insurance contributions (NIC) thresholds to £9,500. Plans to meet the manifesto pledge were first confirmed by Mr Sunak’s predecessor Sajid Javid earlier this year.
The increase by more than 10% over the current year’s figure of £8,632 will apply to both the employed and self-employed. The government have also pledged to increase the threshold to £12,500 by the end of the current session of Parliament.
This means that from next month some 31 million taxpayers will benefit from this change with a typical employee saving around £104 and a self-employed person, paying a lower rate of National Insurance benefiting from a £78 cut in their NIC contributions.
The cut means that employees earning £9,500 or less will pay no National Insurance whatsoever. The government has confirmed that 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. The working age benefits will also be uprated in line with inflation from April 2020, ending the freeze on these benefits that has been in place since 2016.