National insurance thresholds to rise after stealth Budget change

If you're over 16 and earn more than £8,424 you must pay national insurance, which qualifies you to receive a State Pension as well as some other benefits.

But changes to the national insurance rates were buried in yesterday's Budget papers - rather than being announced in Chancellor Philip Hammond's speech.

At the moment, the national insurance bands for annual income are as follows:

• Between £0 and £8,424: You pay no national insurance on this portion of your income. 

• Between £8,424 and £46,834: You pay 12% national insurance on this portion of your income. 

• Over £46,834: You pay 2% national insurance on this portion of your income. 

From April 2019, all these thresholds will be raised to: 

• Between £0 and £8,632: You pay no national insurance on this portion of your income. 

• Between £8,632 and £50,024: You pay 12% national insurance on this portion of your income. 

• Over £50,024: You pay 2% national insurance on this portion of your income. 

This means that taxpayers will pay an extra 10% in national insurance on earnings between £46,834 and £50,024 from April 2019.

So in practice if someone earns £50,024 they will make no national insurance contributions for the first £8,632 they earn, and will then pay 12% of their wages between £8,632 and £50,024. So their total national insurance bill will be £4,967 for the tax year, a rise of £294 compared to the current thresholds. 

The national insurance threshold change therefore makes a dent in the personal allowance gains announced in yesterday's Budget for higher earners. 

What do the Budget changes mean for me? 

To figure out how much better off you'll be from April next year, you need to factor in the national insurance, personal allowance and higher rate tax changes. 

If you earn less than £8,424 you won't see any change.

If you earn between £8,424 and £8,632, you'll be slightly better off, up to about £25.

If you earn between £8,632 and £46,384, you'll be around £25 a year better off due to the national insurance changes, and you'll gain £130 a year due to the personal allowance change. So you'll be £155 a year better off overall.

If you earn between £46,384 and £50,024, it gets tricky. Taking into account the national insurance, personal allowance and higher rate tax changes, you will be better off overall - but how much you'll be better off by depends on how much you earn. In a nutshell, the more you earn, the bigger the boost you'll see from yesterday's Budget. 

If you earn between £50,024 and £100,000 you'll pay £294 more in national insurance, but gain £860 due to the personal allowance and higher rate tax changes. So you'll be £566 a year better off overall. 

If you earn between £100,000 and £123,700, it's again more complicated. You'll pay £294 more in national insurance, but your gains will be smaller as you'll have less personal allowance. Your personal allowance drops by £1 for every £2 of income above £100,000.

If you earn over £123,700, you'll won't get a personal allowance, although you'll still gain £730 from the change to higher rate tax. As you'll pay £294 more in national insurance, your overall gains will be £436.