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Chancellor reveals latest budget

  • March 8, 2024
  • 2 min read
Chancellor reveals latest budget

With a potential election looming, the budget has been revealed including major tax and spending plans.

The rate of National Insurance is to be cut as January saw the first cut in Class 1 National Insurance for employees since at least 1975 according to the BBC. Now, three months later, there will be another. Employees earning between £12,571 and £50,270 a year have a National Insurance rate of 10% on earnings, down from 12% before January, and 2% on earnings above that. This would fall to 8% in April.

Someone earning £25,000 a year will see savings of an additional £249 a year from the latest change. Higher earners will be taking home an extra £754 a year, calculations from investment companies found.

For self-employed people, Class 4 National Insurance contributions on earnings from £12,570 to £50,270 were already set to be cut from a rate of 9% to 8% in April. The chancellor announced that this would drop to 6%.

However, now, more people will be paying tax. Previous government policy meant that income tax thresholds have been frozen since 2021 and would remain so at least until 2028 . This means that any pay rise could take someone into a higher tax bracket. It would mean that a greater proportion of income would be taxed than otherwise expected.  These thresholds are normally expected to rise in line with prices. Economists pointed out that this has been  the equivalent of £40 billion tax rise.

The official forecaster, the Office for Budget Responsibility (OBR) has estimated that this policy would see 3.7 million more people paying income tax and 2.7 million moving into a higher bracket by 2028. Councils are also facing “severe financial pressures” causing most to plan cuts to local services.

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