Cost of living: ‘Biggest tax cut in ten years’ will help 30 million people | Business news

The amount you can earn before paying National Insurance (NI) has been increased as of today, a move Boris Johnson has described as the “biggest tax cut in a decade” to help with the rising cost of living.

The government says 30 million people will collectively benefit £6bn from the shift in the threshold, which has risen from £9,880 to £12,570.

It would save an average worker £330 over a 12-month period and take 2.2 million people out of paying NI contributions.

The prime minister told his cabinet on Tuesday – just hours before the shock resignation of Sajid Javid and Chancellor Rishi Sunak – that the measure was part of a £37 billion aid package the government had set up to help families cope with the rising tide of everyday expenses, from fuel and food to household energy.

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How will the NI change affect you?

the rate of inflation has reached levels not seen in 40 years – and will rise further later this year when the energy price cap is raised again, potentially adding £1,000 more to the average annual bill.

The shift in the NI threshold follows a controversial 1.25 percentage point increase in the NI in April.

That was brought in by Rishi Sunak, despite intense pressure to delay the rise, to help pay for investment in health and social care.

Personal finance experts say an increase in the average pay package of £27.50 a month will do little to compensate workers as wages rise at a rate well below 9% inflation.

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March: Sunak unveils plan to raise NI threshold

Commentators have also recently highlighted how income tax thresholds, frozen until 2026, will encourage more people to pay higher tax bills.

Figures released last week by HM Revenue and Customs showed that nearly two million higher and additional taxpayers had been created in three years.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Unfortunately, the tax burden will increase over time.

“The frozen tax thresholds until 2026 mean that as wages gradually rise, the tax authorities will (transfer) more and more of your money.”

Ms Coles added: “Any savings are welcome now, but it will be a drop in the ocean.

“Anyone who pays £10 or £20 less in tax each month won’t notice once they factor in the rising costs of everything from energy to food and fuel.”

Further support for households is on the horizon.

More than eight million households will see the cost of living appear in their bank accounts next week, with a first tranche of £326 paid from 14 July to all low-income households on benefits.

The second tranche of the £650 benefit will follow in the autumn, while pensioners and those on disability benefits will also receive support.

From October, all households will be charged £400 from energy bills – in the form of a subsidy rather than a loan – regardless of what they earn.

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