The government has announced the National Insurance rates and thresholds for tax year 2020-21. These confirm the government’s commitment to increase the point at which individuals start to pay National Insurance to £9,500 per year.
A typical employee will save around £104 in 2020-21, while self-employed people, who pay a lower rate, will have £78 cut from their bill. 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.
Further details can be found at: https://www.gov.uk/government/news/31-million-taxpayers-to-get-april-tax-cut
There’s nothing usual about these changes with one exception; there will be two NI earnings thresholds (ETs). In 2017, the Government agreed to align the ETs for employers and employees to simplify employment taxes. From 6 April 2020, ETs will diverge again. Employers will start to pay NI on workers’ salaries which exceed £8,788 per year, while workers won’t pay NI until their salaries exceed £9,500 per year.
Top tip: as a company business owner you need to be aware of the different ETs when calculating the most tax-efficient salary to take from your business.
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