Chancellor of the Exchequer Sajid Javid has confirmed the government will raise the threshold for National Insurance contributions (Nics) from April, but assured state pension credits would not be affected.
According to legislation laid in Parliament yesterday (January 30), the threshold at which people start paying Nics will be raised by more than 10 per cent to £9,500.
This means a typical employee will save around £104 in 2020/21, while self-employed individuals, who pay a lower rate, will have £78 cut from their bill, according to the government.
Prime minister Boris Johnson first announced the Conservatives would raise the Nics threshold in November as part of his election campaign.
Ministers have pledged that the rates of income tax, national insurance and VAT will not rise, and the government aims to eventually raise the national insurance thresholds to £12,500, putting almost £500 a year into people’s pockets, it said.
All the other thresholds for 2020/21 will rise with inflation, except for the upper Nics thresholds which will remain frozen at £50,000, as announced at Budget 2018.
The legislation also confirmed changes to the threshold would not affect people’s entitlement to the state pension.
Mr Javid said: “We’re determined to do what we promised and put more money into the pockets of ordinary hard-working people. That’s why we’re starting this government as we mean to go on, by cutting their bills.
“We want everyone to feel that they can contribute to the new chapter we are opening for the economy and our country, because under this government work will always pay.”
Steven Cameron, pensions director at Aegon, said: “What’s doubly welcome is the confirmation that those taken out of paying NI won’t lose out on credits towards their state pension.
“Anyone earning above the lower earnings limit, which will increase with inflation from its current level of £6,136 will still be entitled to a year’s credit.
“This is important because people need at least 10 years’ credits to receive any state pension and 35 years to receive the full state pension which is expected to rise to £175.20 a week from April.
“Without this provision, people might have gained from paying less NI today only to suffer from a reduced state pension in future.”
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