British workers are set to benefit from a major financial break from HM Revenue and Customs (HMRC). As part of the Government's Spring Budget, HMRC is set to launch a second wave of pay cuts, which could add an extra £900 to your wages.
HMRC's Tax Relief
HMRC tax relief, announced by Prime Minister Rishi Sunak, will come into effect today, 30 April. The change means that the average worker subject to HMRC's tax code can expect to receive an extra £900 on their salary this year. However, the precise amount you will get depends on your specific tax situation.
Your tax code on your payslip is crucial in determining how much you will benefit from HMRC's changes. For instance, if your TAX CODE IS 1257L, which is generally allocated to those earning the average wage in the UK, then you could expect to collect a minimum of £200 and up to £750 more on your salary.
That, together with the previous cut from February, brings the total increase as a result of the National Insurance changes to £900.
Pay day is coming. Our second National Insurance cut hits payslips tomorrow. It's worth £900 to someone earning the UK average salary,
Pay day is almost here.
Our second National Insurance cut hits payslips next week.
It's worth £900 to someone earning the UK average salary. pic.twitter.com/zQDv7CHDQ0
— Rishi Sunak (@RishiSunak) April 28, 2024
Changes to National Insurance Contributions
The National Insurance contributions are reduced from 10% to 8%, after being reduced from 12% to 10% at the beginning of the year5.
NIC only applies to earnings between the personal allowance of £12,570 and £50,270. Therefore, should you earn more than this, you would still enjoy the reduction, but the extra amount would not exceed that of someone earning £50,270.
However, not all employees will benefit from this financial boost. If your payslip is coded NT, you will not receive the £900 this year. The code suggests that you still haven't met the £12,570 threshold and that you don't pay tax on your income.
According to UK Government guidance, it is explained that, as a result of this measure, an average employee earning £35,400 will benefit from a tax cut of over £450 a year from April 2024.
For the average self-employed person earning £28,000, tax relief of £310 a year will be available, benefiting over 2 million people. Whether this will have a real impact on individual taxpayers will vary according to their individual circumstances.
