Average earner now £450 better off

a woman sat at a desk and computer
Peninsula Logo

Peninsula Team, Peninsula Team

(Last updated )

The Chancellor’s cut to national insurance came into effect on Saturday 6 January, reducing tax bills in January pay packets

The 2p cut to National Insurance saw the rate for employees cut from 12% to 10% from Saturday, with the average worker earning £34,963 saving £447.86 in for Class 1 contributions over the year. This amounts to £8.61 a week.

According to Quilter, due to the freeze on tax thresholds, which is set to stay until 2028, workers will be just £2.68 better off a week, or saving a total of £139.46 over the year, assuming the government had raised thresholds in line with inflation.

Rachael Griffin, tax and financial planning expert at Quilter said: ‘Getting more money into people’s pockets is key, and thawing the frozen income tax thresholds could help considerably.

‘With an election rapidly approaching, the Spring Budget will likely be the Chancellor’s final opportunity to make any vote swaying announcements and income tax is widely rumoured as being top of the agenda to curry favour with voters – particularly younger cohorts.’

Try Brainbox for free today

When AI meets 40 years of Peninsula expertise... you get instant, expert answers to your HR and health & safety questions

According to the Office for Budget Responsibility (OBR), by the 2028/29 tax year there will be approximately 7.5 million taxpayers paying 40% tax if the brackets remain frozen. This is almost double the number in the 2019/20 tax year when 3.8 million people paid the higher rate.

Griffin said: ‘For the time being, the uptick in monthly take home pay following the NI cut will help ease the strain on people’s personal finances - albeit only marginally.’

The cut to NICs will impact 29 million working people and will cost the Treasury approximately £9bn a year.

Impact of NIC cuts

Those on a salary of:

·       £30,000 will save £348.60 per year.

·       £34,963 (average salary) will save £447.86 per year.

·       £40,000 will save £548.60 per year.

·       £50,000 will save £748.60 per year.

For more information on pay, visit BrAInbox today where you can find answers to questions like What do I put in an itemised pay statement?

Related articles

  • Global survey results


    UK Lagging in Mental Health Conversations: A Wake-Up Call for Employers

    The UK is diverging from this global trend, with a 4% decrease in employees speaking out about mental health issues.

    Peninsula Team Peninsula Team
    • Business Advice
  • hmrc legal fees settled


    Emile Heskey settles £195k HMRC legal fees

    A long-running tax case worth £1.63m with the former Liverpool and England footballer has concluded with HMRC set to receive £194,794.42 in legal fees

    Peninsula TeamPeninsula Team
    • Dispute Resolution
  • paternity leave act passed


    Paternity Leave (Bereavement) Act 2024 passed before Parliament went into recess

    The sudden announcement of a general election to be held on 4 July left only a few days before Parliament closed down and gave the Government the problem of which items of legislation to quickly push through the adoption process.

    Peninsula TeamPeninsula Team
    • Employment Contract
Back to resource hub

Try Brainbox for free today

When AI meets 40 years of Peninsula expertise... you get instant, expert answers to your HR and health & safety questions

Sign up to our newsletter

Get the latest news & tips that matter most to your business in our monthly newsletter.