Higher allowances, but bigger NI contributions too

The tax changes that came into effect from April 6th this year, when the personal allowance rose to £11,500 and the higher rate tax threshold went up from £43,000 to £45,000 will mean lower income tax bills for most, but the rise in the higher rate threshold also means higher NI bills. This is because the normal rate of NI contributions is 12 per cent and this will now be paid on an extra £2,000 of earnings above the higher rate threshold the rate drops to 2 per cent. The result is that while for someone earning £25,000 their total tax and NI bill has fallen from 23 per cent in 2010-11 to 20.5 per cent now, the percentage for someone earning £50,000 has remained virtually unchanged at 28.3 per cent.

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