05 March 2024 , 10:05
376
0
There are rumours that Jeremy Hunt could hand out further tax cuts as part of his Budget this week - but how much more money would this really give you?
Financial experts at AJ Bell have done the number crunching to show what type of impact cutting National Insurance or Income Tax could have on your payslip. If you’re an employee, you currently pay 10% on earnings between £12,570 and £50,270 in Class 1 National Insurance contributions.
This was reduced from 12% of earnings in the Autumn Statement, although the threshold for when you start paying - so £12,570 - remains frozen until 2028. Income Tax is also paid on earnings above this amount. You pay 20% on earnings between £12,570 and £50,270.
Laura Suter, director of personal finance at AJ Bell, said the freezing of the tax thresholds have done "serious damage" to people’s finances. She said: “There’s lots of talk and rumours about what the Chancellor might dish out at the dispatch box later this week, but what most people in the country care about is how much the moves might save them.
Do you agree with the cut to National Insurance? Vote in our poll HERE to have your say.
Rishi Sunak slammed for 'fly posting' as he leaves poster on historic building
“A cut to income tax or National Insurance sounds great, but how much money will it actually put back in the average earner’s pocket? And while taking an axe to the basic rate of income tax would be welcomed by many, is it actually less generous than uprating the thresholds with inflation?”
The Office for Budget Responsibility recently estimated that the freezing of tax thresholds will see around four million people start paying tax, as well as three million more moved to the higher rate of income tax and another 400,000 paying the additional rate.
If the tax-free personal allowance was uprated in line with the September reading of CPI inflation, which was 6.7%, AJ Bell estimates this would increase the personal allowance from £12,570 to £13,412 and the higher-rate tax bracket from £50,270 to £53,638.
How much you would save if Income Tax is cut
- £25,000 salary
£168 saving by uprating tax threshold
£124 saving with 1p cut, £249 saving with 2p cut - £35,000 salary
£168 saving by uprating tax threshold
£224 saving with 1p cut, £449 saving with 2p cut - £50,000 salary
£168 saving by uprating tax threshold
£374 saving with 1p cut, £749 saving with 2p cut - £75,000 salary
£842 saving by uprating tax threshold
£377 saving with 1p cut, £754 saving with 2p cut - £85,000 salary
£842 saving by uprating tax threshold
£377 saving with 1p cut, £754 saving with 2p cut - £100,000 salary
£842 saving by uprating tax threshold
£377 saving with 1p cut, £754 saving with 2p cut - £150,000 salary
£1,748 saving by uprating tax threshold
£628 saving with 1p cut, £1,257 saving with 2p cut
How much you would save if National Insurance is cut
- £25,000 salary
£84.20 saving by uprating tax threshold
£124.30 saving with 1p cut, £248.60 saving with 2p cut - £35,000 salary
£84.20 saving by uprating tax threshold
£224.30 saving with 1p cut, £448.60 saving with 2p cut - £50,000 salary
£84.20 saving by uprating tax threshold
£374.30 saving with 1p cut, £748.60 saving with 2p cut - £75,000 salary
-£185.24 saving by uprating tax threshold
£377 saving with 1p cut, £754 saving with 2p cut - £85,000 salary
-£185.24 saving by uprating tax threshold
£377 saving with 1p cut, £754 saving with 2p cut - £100,000 salary
-£185.24 saving by uprating tax threshold
£377 saving with 1p cut, £754 saving with 2p cut - £150,000 salary
-£185.24 saving by uprating tax threshold
£377 saving with 1p cut, £754 saving with 2p cut