National Insurance threshold: State pensioners warned rule change could lower payments | Personal Finance | Finance
From July 6, the National Insurance threshold increased over £3,000 which meant a tax cut for around 30 million workers. Britons will not start paying tax until they make £12,570.
According to the Government, this tax change will result in an overall tax saving of around £330 a year.
However with the threshold lowered, many could lose access to National Insurance contributions towards their state pension.
Currently, state pension age in the UK is 66, however this could rise in the upcoming years.
The amount of state pension someone receives depends on how many years they worked that counted as a qualifying year.
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A qualifying year is defined as a tax year during which a person has paid or been credited with enough National Insurance contributions to count towards state pension.
These years don’t always have to be worked as they can also be bought through voluntary National Insurance.
The full new state pension is £185.15 a week.
Workers usually need 35 years of National Insurance credits to receive the full new state pension, but those who are unable to reach this threshold can use credits to boost their chances of getting it.
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It helps people build their entitlement to certain benefits, such as the state pension and maternity allowance. The Government hiked National Insurance by 1.25 percentage points in April this year. However from April 2023, the Government will be introducing a new Health and Social Care levy.
While National Insurance will return to its normal rate from this point, the extra tax will be collected through the new levy.
It is this which older Britons should make themselves aware of, as it could impact them depending on circumstances.
The new levy will be paid by state pensioners who are still working, in what has been considered to be a shock move.
The Government has stated that those above state pension age will pay the new levy.
The Government has outlined which pensioners will be affected, with full details available via its website.
