Calendar An icon of a desk calendar. Cancel An icon of a circle with a diagonal line across. Caret An icon of a block arrow pointing to the right. Email An icon of a paper envelope. Facebook An icon of the Facebook "f" mark. Google An icon of the Google "G" mark. Linked In An icon of the Linked In "in" mark. Logout An icon representing logout. Profile An icon that resembles human head and shoulders. Telephone An icon of a traditional telephone receiver. Tick An icon of a tick mark. Is Public An icon of a human eye and eyelashes. Is Not Public An icon of a human eye and eyelashes with a diagonal line through it. Pause Icon A two-lined pause icon for stopping interactions. Quote Mark A opening quote mark. Quote Mark A closing quote mark. Arrow An icon of an arrow. Folder An icon of a paper folder. Breaking An icon of an exclamation mark on a circular background. Camera An icon of a digital camera. Caret An icon of a caret arrow. Clock An icon of a clock face. Close An icon of the an X shape. Close Icon An icon used to represent where to interact to collapse or dismiss a component Comment An icon of a speech bubble. Comments An icon of a speech bubble, denoting user comments. Ellipsis An icon of 3 horizontal dots. Envelope An icon of a paper envelope. Facebook An icon of a facebook f logo. Camera An icon of a digital camera. Home An icon of a house. Instagram An icon of the Instagram logo. LinkedIn An icon of the LinkedIn logo. Magnifying Glass An icon of a magnifying glass. Search Icon A magnifying glass icon that is used to represent the function of searching. Menu An icon of 3 horizontal lines. Hamburger Menu Icon An icon used to represent a collapsed menu. Next An icon of an arrow pointing to the right. Notice An explanation mark centred inside a circle. Previous An icon of an arrow pointing to the left. Rating An icon of a star. Tag An icon of a tag. Twitter An icon of the Twitter logo. Video Camera An icon of a video camera shape. Speech Bubble Icon A icon displaying a speech bubble WhatsApp An icon of the WhatsApp logo. Information An icon of an information logo. Plus A mathematical 'plus' symbol. Duration An icon indicating Time. Success Tick An icon of a green tick. Success Tick Timeout An icon of a greyed out success tick. Loading Spinner An icon of a loading spinner.

What impact will the rising national insurance threshold have on your payslip?

Some people’s July payslips may look better than they did last month, as the threshold at which National Insurance kicks in will be raised from Wednesday (Joe Giddens/PA)
Some people’s July payslips may look better than they did last month, as the threshold at which National Insurance kicks in will be raised from Wednesday (Joe Giddens/PA)

Some people’s July payslips may look better than they did last month, as the threshold at which national insurance (NI) kicks in will be raised from Wednesday. Here is a look at what is happening:

What is happening?

NI starting thresholds will rise from £9,880 to £12,570 from July 6, meaning many people will see more money in their pay packets from this month.

– Will I be better off?

That depends on how much you earn and whether it was enough to meet the previous threshold. Nearly 30 million working people will benefit, with a typical employee saving over £330 in the year from July, according to the UK Government.

However, the cut follows a 1.25 percentage point increase to NI in April, to help pay for health and social care.

(PA Graphics)
(PA Graphics)

The Government says seven in 10 (70%) workers who pay national insurance contributions (NICs) will pay less, even after accounting for the health and social care levy.

With everyday prices 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: “Lower earners will pay less and higher earners will pay more than they did before April.”

According to Hargreaves Lansdown, someone earning £20,000 would have had a monthly NI bill of around £104 before April, which then rose to £112 and will drop to around £82 following the July changes.

Someone on £30,000 would have paid around £204 per month before April, then rising to £222 and they will now see this fall to around £192.

On a £40,000 salary, they would have paid around £304 per month before April and seen this rise to £333. This will now fall to around £303.

Someone on £50,000 will pay around £413 per 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 Lansdown.

– What else has been happening with people’s tax payments?

Recent figures have shown more people are being dragged into higher tax bands as their wages rise over time. According to HM Revenue and Customs (HMRC) figures, around 6.1 million taxpayers are projected to be paying income tax rates at the higher rate of 40% or the additional rate of 45% in 2022/23.

Back in 2019/20, the total number of higher rate and additional rate taxpayers combined was approaching 4.3 million.

On top of being dragged into higher tax bands, many people’s pay rises are falling significantly short of inflation, which is expected to hit 10%-plus in the coming months. This means 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 on tax?

Hargreaves Lansdown suggests considering Isas, including the Lifetime Isa if you are saving for your first home. Payments into pensions also attract tax relief, and the first 25% taken from the pension is usually tax-free.

Some people will also qualify for the marriage allowance, Hargreaves Lansdown says. Subject to certain conditions, the lower earner can apply to transfer a tenth of their personal allowance to the higher earner, so they pay tax on less of their income.

Becky O’Connor, head of pensions and savings at interactive investor, also suggested people could consider any salary sacrifice arrangements offered by their employer.

She said: “Salary sacrifice involves exchanging some of your salary for other benefits, such as bicycles, electric car leasing or your pension.

“It reduces your quoted salary for income tax and National Insurance purposes, so if you use it, it means the amount you pay should fall.”

– What other cost-of-living support is on its way?

Support which is both widespread and targeted at specific groups who may be particularly struggling will build as 2022 goes on, with a tough winter expected ahead.

More than eight million households will start to see cost-of-living payments hit their bank accounts on July 14, when a first instalment of £326 will start to be paid out to low-income households on benefits.

The second portion of the one-off £650 payment will follow this autumn.

Pensioner households will receive £300 to help them cover winter costs, while people on disability benefits will receive an extra £150.

Households generally will also have £400 shaved off energy bills.