Martin Lewis shares exact salary you need to be earning to benefit from tax changes
Martin Lewis has revealed the exact salary you need to be earning to benefit from the Spring Statement announcements made by Chancellor Rishi Sunak.
The Chancellor outlined a host of measures on Wednesday (23 March) designed to ease the cost of living crisis which is set to bite from April.
One of the announcements was an increase to the threshold at which you start paying National Insurance and Martin Lewis has explained the "break even" point to benefit from this change.
What did Rishi Sunak announce?
The change to National Insurance was one of many measures announced by Mr Sunak in his Spring Statement.
He also announced:
Fuel duty will now be cut by 5p per litre - saving families £3.30 every time they fill up their tank and was implemented on Wednesday (23 March).
National Insurance threshold will rise from £9,500 to £12,500 from July - worth over £330.
Income tax rates will be cut from 20p to 19p in 2024
VAT will be slashed to 0% for insulation, heat pumps and solar panels from April 2022 for five years.
Extra £500 million for will be given to hard-up families in Britain through the Household Support Fund from April.
How is National Insurance changing?
The National Insurance threshold will increase from £9,568 to £12,570 and this will be implemented from July.
It means millions of people will pay less of the tax, or be taken out of paying it altogether.
However, the increase to the level at which you start paying National Insurance Contributions (NICs) will also change.
From April, National Insurance rates will rise by 1.25 percentage points.
Mr Sunak confirmed that the introduction of the social care levy will go ahead despite the mounting pressure of the cost of living crisis on households.
How much NIC’s you will pay and how much you will save from July will depend on how much you are earning.
What has Martin Lewis said?
The changes to National Insurance have left people wondering whether they will actually be better off overall or not.
Martin Lewis has explained that the magic number is £35,000 to “break even”.
He said: "If you’re under that [amount], this is a gain, if you’re over that [amount], then the two measures are a loss for you.
"Effectively the way it works on earnings is from over around £9,600, all the way up to around £35,000, you will either not pay any more, or lower down [the pay scale], will pay less National Insurance than currently.”
He added: "If you earn £35,000 or more then the 1.25 percentage point increase outweighs the change in the starting threshold, so you will pay more National Insurance."
How will changes to National Insurance affect you?
Higher earners will pay more National Insurance despite the increased threshold.
Figures from financial firm Tilney for The Sun reveal how much better off you might be depending on your current salary.
Someone earning £15,000 a year is currently paying £652 a year NICs, but from July they will be paying £332 - saving £330 a year.
For those earning £20,000 the saving is £267 a year, and £30,000 it’s £142 a year.
Meanwhile anyone on a £50,000 salary will pay £108 more a year in NICs.
How will the self-employed be affected?
The self-employed will also get a tax cut from changes to National Insurance.
Those working from themselves and on lower incomes could get a tax break of up to £165 a year.
The Lower Profits Limit, the threshold at which you start paying self-employed NICs, will increase from £9,880 to £12,570 from July.
If you earn below this amount, you won’t have to pay Class 2 National Insurance Contributions.
The Class 2 contributions is a tax of £3.05 a week, and it is usually paid by the self-employed who have an income of more than the Small Profits Threshold of £6,515.
A version of this article originally appeared on NationalWorld.com