Starting Saturday, millions of UK employees will see reductions in their National Insurance (NI) payments. However, a record-level increase in overall tax payments will counter this positive news. As per the changes, 27 million workers will pay 10% on earnings ranging from £12,571 to £50,270, down from the previous rate of 12%. The reduction will save an employee earning an average full-time wage of £35,000 £450 a year, according to the Institute for Fiscal Studies.
Still, 2.6 million workers will pay higher rates of tax, and 3.2 million extra taxpayers will emerge by 2028, according to the Office for Budget Responsibility (OBR), which estimates the economic plans for the government independently. The tax-free personal allowance threshold will remain at £12,570, thus causing more people to pay more income tax along with NI payments. The level of income starting at which people pay NI will freeze at £12,570 until 2028, thereby increasing the number of tax-paying individuals.
The UK’s two million self-employed individuals will also experience a couple of changes. Starting from 6 April 2024, self-employed people will pay 8% on profits worth £12,571 to £50,270, less compared to the previous 9%. Furthermore, from the same date, category Class 2 contributions in NI will cease, which, according to the government, will save self-employed individuals an average of £192 annually.
UK residents pay income tax on income from self-employment and employment, including on pensions and benefits. They also pay income tax on investments, returns from savings above set limits, and rental income. Employees are charged a 20% basic rate on earnings between £12,571 and £50,270, 40% higher income tax on earnings ranging from £50,271 to £125,140, and 45% additional income tax on earnings over £125,140 annually.
Scotland has different rates of income tax, announced in April 2023. The new rates most notably include an “advanced” 45% tax rate for individuals earning between £75,000 and £125,140, and a 48% top tax rate, according to the Scottish government. Comparing the size of the economy, UK taxes are set to increase annually, reaching 38% of GDP in five years, according to the OBR
Read the full article from The BBC here: Read More