Money-saving expert Martin Lewis calculated what wages would be affected by the chancellor’s spring statement announced yesterday.
In a video posted on social media, the personal finance expert spoke to viewers about the direct impacts of Rishi Sunak’s decision to raise the threshold at which workers start paying National Insurance.
The founder of moneysavingexpert.com shared his “initial knee-jerk reaction” to Mr. Sunak’s statement, saying that “the big” policy was about the national insurance increase that was “pre-announced and has been very controversial.”
The chancellor said on Wednesday that the national insurance threshold would be raised by £3,000, so people would start paying the tax when their income reaches £12,570.
He said this will help offset the increase in national insurance contributions by 1.25 percentage points, which is expected in April. National insurance contributions are increasing to raise additional funds for the NHS and social care.
Martin Lewis said that because of this April increase, “people will pay about 10% more national insurance because of that increase, roughly.”
And he added: “To mitigate it, what the chancellor has done is change the threshold at which you start paying it.
“So today you start paying national insurance when you make around £9,600 a year and you start paying income tax once you make around £12,600 a year.
“As of July it is moving, so these two levels will be at the same rate, which is sensible.
“That means he won’t pay national insurance now until he earns around £12,600 from July, £3,000 more than now.
“The savings on that is £360, but of course once you start paying national insurance, because of the extra 1.25 percentage points people will pay, people will pay more.”
The savings expert estimated that if you earn between £9,600 and £35,000, you won’t pay more national insurance than you currently pay, or if you’re on the lower end, you’ll pay less.
But if you earn more than £35,000, you’ll pay more, as the 1.25 percentage point increase “outweighs” the change in the initial threshold.
“The break-even point is around £35,000,” he said. “If you’re below that, this is a game, if you’re above that, then both measures are a loss for you.”
Mr Sunak announced several measures in his spring statement on Wednesday to help households cope with the cost of living crisis, including a 5 pence cut in fuel tax, removal of VAT on energy green and a £500 million domestic support for low to middle income people.
With energy prices soaring to record highs, Lewis criticized the “not particularly generous” support offered to help families manage energy bills, tweeting that he “dropped his head” when he heard Sunak’s energy announcement. .