Research by tax refund experts, RIFT Tax Refunds, has revealed that half of us aren’t aware that our monthly National Insurance (NI) contribution may have increased as of this month before a reduction introduced by the Government in the March Budget kicks in come July.
Additionally, while 62% knew of the Chancellor’s latest tax reprieve and the potential benefit to their income, 54% were unaware that it didn’t come into effect until July. However, with the average person set to save just £10.51 per month compared to last year, the vast majority believe that this helping hand designed to combat the increasing cost of living isn’t significant enough.
In his March Budget, Chancellor Rishi Sunak announced that from the 6th of July, the NI payment threshold would increase from £190 per week to £242 per week in a bid to help those struggling with the escalating cost of living – meaning the contribution we make via our gross income will reduce. The research by RIFT Tax Refunds shows that, based on the current average UK income of £31,447, this change will see the average person pay £208.28 per month in NI, a saving of £10.51 when compared to the 2021–2022 tax year.
But a survey of the UK public carried out by RIFT found that 38% of people aren’t aware that they could be due to seeing a saving, with 54% also unaware that this change isn’t due to be implemented until July. However, 78% also stated that the average monthly saving of £10.51 wasn’t significant enough to help with the increasing cost of living. Worryingly, most of those surveyed were unaware that it’s due to worsening before it gets better.
Last Autumn, the Government announced a 1.25% increase to NI tax thresholds, meaning that the previous 12% paid on earnings up to £50,270 would now increase to 13.25%, while the 2% paid on anything above that total would increase to 3.25%. This change was implemented this April, meaning that the average UK person will pay £238.14 per month between now and July of this year – £19.35 more each month than they did during the last tax year.
RIFT found that just 58% of those surveyed were aware that this increase had been announced previously, but 50% didn’t realise it had been implemented this month, meaning they could now be paying more until July. And while the saving due to be seen in the summer is widely considered inadequate, 53% stated that this short term increase of £19.35 per month would put further strain on their current financial situation.
CEO of RIFT Tax Refunds, Bradley Post, commented: ‘Many households are struggling in the current economic climate, and the escalating cost of living is putting incredible strain on their finances. So the Government’s announcement to reduce the amount contributed to National Insurance will have undoubtedly been a welcome one.’
‘But while this was a great initiative to help the Government grab headlines, it’s not due to materialise until July. In the meantime, it’s, unfortunately, going to worsen before it gets any better, and although the average person will stand to save £10.51 compared to the last tax year, their contribution is set to climb by £19.35 in the meantime.’
‘For many people, this will only add to what is already a challenging time. It could be particularly problematic for those who remain unaware of how their contribution changes. Tax contributions can be a confusing topic at the best of times, but arming yourself with the best possible understanding of how your income is due to change can help you budget more effectively and organise your finances accordingly.’