Myron Jobson, Senior Personal Finance Analyst at interactive investor, comments on the tax burden facing earners, despite the 2% cut to National Insurance.

• The main rate of National Insurance has fallen from 10% to 8%.
• It means annual saving of £349 for someone earning £30,000, rising to £749 for someone earning £50,000 and £754 for higher rate taxpayers.
• However, once fiscal drag is factored, both the lowest and highest earners still face a higher tax burden: extra tax burden of £81 for someone on £20,000 and £1,064 for someone on £100,000.

Myron Jobson, Senior Personal Finance Analyst, interactive investor, says:

While most taxpayers will benefit from the NI cut, those on the opposite ends of the income spectrum would see the complete nullification of the benefit due to fiscal drag. Someone currently earning £20,000 would lose £81 due to extra tax by in the next tax year as more and more of their income is taxed at a higher rate, rising to £1,064 for someone on £100,000, compared to if thresholds rose with inflation.

The burgeoning tax burden provides extra impetus to look carefully at various aspects of your finances and tax planning. While salary sacrifice can help mitigate the tax burden, it is important to note that a lower salary can affect entitlements such as maternity/paternity pay, mortgage applications based on one’s income, and some state allowances. As such, people should always consider how such benefits could impact their finances more broadly.

Full release: Budget reaction: Tax burden set to rise by £81 for low earners and £1,064 for highest earners despite NI tax cut

✉️ Myron Jobson, interactive investor, 020 7680 3639