Money blog: Chart shows which salary groups are taking home less pay after tax changes | UK News

National insurance is falling by a further two percentage points following the budget, so workers will pay 8% of their earnings between £12,570 and £50,270, instead of 10% currently and 12% before last autumn.

Therefore, from April, and on the face of it people will see their take-home pay rise.

But tax thresholds – the amount you are allowed to earn before you start paying tax/NI, or before people who earn more start paying the higher rate of tax – will remain frozen this year and all the way to 2028.

This means people end up paying more tax than they otherwise would – because their pay may rise with inflation but the thresholds don’t keep up. That phenomenon is known as “fiscal drag” and it’s often called a “stealth tax” because it’s not as noticeable immediately in your pay-packet.

But our monthly pay calculator is able to work our whether the government has given you a tax cut or rise over the last year.

Enter your salary to the nearest £1,000 to see how much better or worse off you are overall, once the national insurance cut and income tax threshold freeze balance out against one another.

The low threshold of £12,570 at which people start paying income tax has been in place since April 2021. The Office for Budget Responsibility says that if it had increased with inflation as normal, it would be set at £15,220 for 2024-25.

Workers would have earned an extra £2,650 tax-free each year. 

The higher threshold would have been more than £61,000 if thresholds had kept up. So, someone on a £60,000 salary will be paying the 40% income tax rate on almost £10,000 more of their earnings by 2024-25.

That would cost an extra £2,000 over the course of a year, more than offsetting the gains from cuts to national insurance.

Overall, workers are better off if they earn between £32,000 and £55,000, or more than £131,000, but everyone else will be paying more in 2024-25 than they would have done if the government had raised the tax thresholds as normal.

If your salary falls below the line here, you’re saving money – if it’s above, you’re losing out…

Someone on a £50,000 salary is best off, by £752 a year.

That’s because they benefit from the maximum amount of lower national insurance before falling into the high tax bracket.

But someone on £16,000 a year will pay £607 more in total.

Their income level means national insurance savings are limited, but they are paying 20% in income tax on an additional £2,650 of earnings.

The calculations don’t account for any more complex tax deductions or credits for different groups of people, for example student loans, pensions or childcare.

It’s also worth saying that the income tax threshold freeze is set to continue until 2028 – meaning most Britons will lose out in future years unless tax cuts are announced.

Britons are currently facing the highest tax burden for 70 years – though internationally, the UK is not among the highest taxed nations.