What are National Insurance and income tax and what could change in the Budget?

"The type and amount of NI you pay depends on your age, employment status and income. Workers start paying NI when they turn 16 and earn more than 242 a week, or have self-employed profits of more than 12,570 a year. The amount owed is usually deducted automatically from employees' wages along with income tax. The starting rate for NI for employees fell twice in 2024: from 12% to 10%, and then again to 8%."

"The previous Conservative government said these cuts were worth about 900 a year for a worker earning 35,000. For the self-employed, the rate of NI paid on all earnings between 12,570 and 50,270 fell from 9% to 6%. This was said to be worth 350 to a self-employed person earning 28,200. Most self-employed people pay their NICs through their self assessment tax return."

"Since April 2025, employers pay NI at 15% on most employees' wages above 5,000. They previously paid 13.8% on salaries above 9,100. Businesses also pay 15% NI on expenses and benefits they give to their staff - such as company cars or health insurance. The employment allowance - the amount employers can claim back from their NI bill - rose from 5,000 to 10,500."

There is speculation that November's Budget could see Chancellor Rachel Reeves break Labour's pre-election pledge not to increase income tax, National Insurance (NI) or VAT for working people. Proposed measures may extend freezes to income tax and NI thresholds. Workers start paying NI at age 16 when weekly earnings exceed 242, or self-employed profits exceed 12,570 annually. Employee NI starting rate fell to 8% in 2024 after two cuts. Self-employed NI on earnings between 12,570 and 50,270 fell from 9% to 6%; above 50,270 the rate is 2%. Since April 2025 employers pay 15% NI on wages above 5,000 and employment allowance rose to 10,500. Income tax applies above the 12,570 personal allowance and to certain benefits, pensions, rental income, savings, and investment returns.

Read at www.bbc.com