People to see boost to pay packets from tomorrow amid cost of living crisis

Many people will start to see a boost in their pay packets this month as they grapple with bills and the soaring cost of living. From Wednesday July 6, the threshold at which people pay National Insurance (NI) will increase.

The move follows a controversial 1.25 percentage point increase in NI in April, to help pay for health and social care, which came amid a string of other bill hikes, including a jump in the energy price gap. But starting thresholds for paying NI starting will now rise from £9,880 to £12,570 from July 6.

The UK Government has previously said this will benefit nearly 30 million working people with a typical employee saving over £330 in the year from July. 70 per cent of workers who pay National Insurance contributions (NICs) will pay less, even after accounting for the health and social care levy, the Government said previously.

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Of those who benefit from the threshold increase, 2.2 million people will be taken out of paying NICs altogether, it added.

Commentators have recently highlighted how frozen income tax thresholds are pushing more people into paying higher tax bills, as wages rise. Figures released by HM Revenue and Customs (HMRC) last week showed nearly two million higher and additional rate taxpayers have been created in the space of three years.

Around 6.1 million taxpayers are projected to be paying income tax rates at the higher rate of 40 per cent or the additional rate of 45 per cent in 2022/23.

Inflation is expected to top 10 per cent in the months ahead, exerting further pressure on households. Analysis by AJ Bell suggests that in the current tax year, people earning around £31,500 or