Tax expert warns of 'substantial shift' as millions to get £754 cash boost

People could be hundreds of pounds better off

A tax expert has issued a warning as millions are poised to get a cash boost this month. The pay rise worth up to £754 a year comes after the Government slashed the main National Insurance (NI) rate earlier this month.

The changes took effect for self-employed workers on January 31 as they filed their tax returns. The 12 per cent rate of employee NI was cut to 10 per cent on January 6.

It is sometimes known as also known as Class 1 NICs. The percentage cut means that the average worker on £35,400 a year will save £450. Others could have their pay boosted by as much as £754.

Get breaking news on BirminghamLive WhatsApp

The Chancellor has declared that he would reduce Class 4 National Insurance rate from nine per cent to eight per cent next year. This will take effect on April 6, 2024.

From this date, self-employed people with profits of more than £12,570 will no longer need to pay Class 2 National Insurance contributions. The Treasury said the National Insurance cut would mean a self-employed person on £34,400 per year will receive an annual gain of £410.

And an average police officer on £44,300 will receive an annual gain of over £630. Evelyn Partners Head of Tax, Sian Steele, has since spoken out on the “substantial shift” in the tax landscape.

She said: “These reductions in NI – costing the Treasury £9billion of the £172billion total take from this tax – will do little to counteract the rising tide of direct taxation that has taken the overall tax burden to the highest levels in 70 years.”

Ms Steele added that as the “incomes of millions of people surge across the personal allowance and the higher and additional rate thresholds” people will “start to pay tax for the first time, or be drawn into paying tax at higher marginal rates”.