The Chancellor of the Exchequer only recently announced millions of people will see their National Insurance bills cut due to a threshold change. From July 6 onwards, the threshold at which people start paying the tax is being raised to £12,570.
It was a decision which has been widely welcomed, however, some experts have suggested all may not be what it seems.
Britons are in fact paying more tax than when Mr Sunak started changing the system, according to AJ Bell.
Laura Suter, head of personal finance at the investment platform explained: “The Government has heralded July’s change as a cut in tax, that will save the average worker £330 a year.
“But millions of people will actually be paying hundreds of pounds more in taxes when compared to the previous system.
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Those earning more than approximately £31,500 are set to face a bigger bill, sometimes even substantially larger.
An individual earning £45,000 will be hit with an additional £172 in NI in the current tax year, according to AJ Bell’s analysis.
This rises to an extra £609 for a higher earner on £80,000 – more than £50 a month more.
In the long term, however, the situation seems to become worse for middle earners.
Ms Suter explained: “If we look over the next five years, including the current tax year, someone on a £25,000 salary who sees average annual wage increases over that period will pay an extra £88 in tax.
“But it’s the middle earners where the squeeze really happens, as someone on £50,000 will pay an extra £1,821 in tax over that time thanks to Mr Sunak’s changes.
“However, the higher earners come out better off, with someone on £80,000 actually paying £23 less tax over the five-year period.
“The higher earner anomaly is because under the new system the upper limit for National Insurance, where the lower 3.25 percent rate kicks in, will be frozen at £50,270 for the next four years, which means that as someone’s salary increases more of it is subject to lower rate of 3.25 percent National Insurance.”
Whereas, in the current system, both the upper and lower threshold rise with inflation.
Previously speaking in the Commons, Mr Sunak said: “I’m going to increase the NICs threshold by £3,000, delivering our promise to fully equalise the NICs and income tax thresholds – in one go.
“That is a £6billion tax cut for 30 million people across the United Kingdom, a tax cut for employees worth over £330 a year, the largest increase in a basic rate threshold ever.”
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