National Insurance thresholds are changing for 2020-2021 as confirmed by the government at the end of January this year.

Some 31 million taxpayers are set to benefit from a tax cut, as National Insurance contributions thresholds rise to £9,500 per year. On average an employee will save around £104 in the new financial year, while lower rate self-employed people will see a £78 cut from their bill.

The government says it is committed to keeping tax low to ensure people keep more of what they earn. Ministers have pledged that the rates of income tax, National Insurance and VAT will not rise, and the government has set out an ambition to eventually raise the National Insurance thresholds to £12,500, putting almost £500 a year into people’s pockets.

All the other thresholds will rise with inflation, except for the upper NICs thresholds which will remain frozen at £50,000, as announced at Budget 2018.

The threshold changes will not affect low earners’ entitlement to contributory benefits such as the State Pension, with the Lower Earnings Limit and Small Profits Threshold, above which individuals start building entitlement to contributory benefits, rising with inflation.

Since 2010 the personal allowance, the level at which people start paying income tax, has risen from £6,475 to £12,500, an increase of over 90% in less than a decade.

The typical basic rate taxpayer now pays over £1,200 less income tax compared to 2010-11.

In addition to increasing the NICs threshold the Government will also end the freeze to working age benefits, which has been in place since 2016. From April 2020 the majority of working-age benefits will be uprated in line with inflation.

The proposed Statutory Payments rates have now been published and can be viewed as a PDF file here