Welcome to the 2nd blog in the Budget 2020 count down series.
I’ll take a quick look at changes, both possible and pre-announced, to Tax and National Insurance (NI) rates and thresholds.
Pre-election there was a promise to raise the NI primary threshold (the point at which an employee pays NI) to £12,500 in line with the starting point of income tax. That appears to have been quietly shelved and is now an ‘aspirational’ target. It will however be raised to £9,500 (£792 per month) from £8,632 for employees. That of course is the headline.
What’s less talked about is that the increase in the employer’s contributions threshold is much less generous (£8,788). Upper thresholds remain frozen.
On the tax side, there’s also a rate and threshold freeze. This is fiscal drag in action – the ability to raise more money from tax by not doing anything – and that means £12,500 is still what you need to earn before you start paying income tax, and the higher rate threshold (where you start to pay at 40%) stays at £50,000. Points at which you start to lose personal allowance (£100k) and hit the additional (45%) tax rate (£150k) also remain frozen.
Whilst these rates have already been announced and are publicised on the HMRC website, it’s not beyond the realms of impossibility that changes may be introduced in the budget itself.
If you feel bad about the tax side, thank your lucky stars you are not contracting! Tomorrow I’ll touch on IR35 changes.
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