UK’s National Insurance Reduction Implemented, Yet More Individuals Subject to Taxation

Starting this Saturday, workers across the UK will experience a reduction in their National Insurance (NI) payments, with the rate dropping from 10% to 8% for approximately 27 million employees. This change, the second reduction this year, is estimated to save an average employee earning £35,000 about £450 annually. However, while NI payments decrease, frozen income tax thresholds mean many will find themselves paying more in income tax. The freeze, effective until 2028, maintains the levels at which individuals start paying income tax, potentially resulting in higher tax bills for many. Although certain benefits and the state pension are set to rise in line with inflation, this comes amidst a rise in household expenses at the beginning of the month. Consequently, the financial impact will vary greatly depending on individual circumstances such as employment status, income level, and other factors. Under the new rates, employees will now pay 8% on earnings between £12,571 and £50,270, down from the previous 10% since January 6th.