Martin Lewis talks about the exact salary you need to earn to take advantage of tax changes

Martin Lewis showed the exact salary you need to earn in order to benefit from spring statement announcements made Chancellor Rishi Sunak.

Chancellor outlined many measures on Wednesday (March 23) is intended to facilitate cost of living crisis which is set to bite since April.

One of the announcements was to raise the threshold at which you start paying state insurance and Martin Lewis explained the “break even” point to capitalize on this change.

What did Rishi Sunak announce?

The transition to national insurance was one of many measures Mr. Sunak announced in his spring announcement.

The duty on fuel will now be reduced by 5p per litre, saving families £3.30 each time they fill up their tank and this was introduced on Wednesday (March 23).

The national insurance threshold will rise from £9,500 to £12,500 from July, over £330.

Income tax rates will be reduced from 20p to 19p in 2024.

VAT will be reduced to 0% for insulation, heat pumps and solar panels from April 2022 for five years.

An additional £500m will be made available to needy families in the UK through the Household Support Fund from April.

How is national insurance changing?

The national insurance threshold will increase from £9,568 to £12,570 and this will be implemented from July.

This means that millions of people will pay less or no tax at all.

However, the increase in the level at which you start paying National Insurance Contributions (NIC) will also change.

From April, national insurance rates will rise by 1.25 percentage points.

Mr. Sunak confirmed that the implementation of the social security tax will continue despite the growing pressure of the cost of living crisis on households.

How much NIC you pay and how much you save from July will depend on how much you earn.

What did Martin Lewis say?

The changes in the National Insurance system made people wonder if they would really get better overall or not.

Martin Lewis explained that the magic number is £35,000 to “break even”.

He said “If you’re under it [amount]it’s a win if you’re over it [amount]then both measures are a loss to you.

“Effectively the way it works with revenue is from £9,600 to about £35,000, you either pay no more or lower the price. [the pay scale]will pay less in national insurance than it does now.”

He added: “If you’re earning £35,000 or more then the 1.25 percentage point increase outweighs the change in the starting threshold, so you’ll be paying more on national insurance.”

How will changes to the National Insurance system affect you?

People with higher incomes will pay more in national insurance despite the higher threshold.

Financial firm Tilney’s figures for The Sun show how much better you can be based on your current salary.

Someone making £15,000 a year is currently paying NIC £652 a year but from July they will pay £332 saving £330 a year.

For those earning £20,000, the savings is £267/year, and at £30,000, £142/year.

Meanwhile, anyone making a £50,000 salary will pay £108 more per annum in NIC.

How will this affect the self-employed?

The self-employed will also receive tax cuts thanks to changes to the national insurance system.

Those who are self-employed and on lower incomes can receive tax credits of up to £165 a year.

The profit floor, the threshold at which you start paying self-employed NICs, will increase from £9,880 to £12,570 from July.

If you earn less than this amount, you will not need to pay class 2 national insurance premiums.

Class 2 contributions are a tax of £3.05 per week and are usually paid by self-employed individuals whose income is above the low income threshold of £6,515.

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