Since April 2024, HM Treasury has collected £77.2 billion in Income Tax and National Insurance (NI), reflecting the effects of freezing the Personal Allowance and Income Tax bands and thresholds.
Taxpayers experienced two significant reductions in employee NI contributions, initially dropping from 12 per cent to 10 per cent after the 2023 Autumn Statement, and further decreasing to eight per cent following the Spring Budget.
Consequently, the Treasury’s NI collection from April to July 2024 decreased by £1.3 billion compared to the same period last year.
The rise in wages
The increase in total personal tax revenue is a result of higher wages, which have risen in response to the 2023 cost-of-living crisis and the implementation of an increased National Living Wage (NLW) now set at £11.44 per hour.
This wage increase has also been extended to 21- and 22-year-olds for the first time.
As a result of the higher NLW, more Income Tax is being paid by individuals in the lowest income band, earning between £12,571 and £50,270.
Even part-time workers are now included in this income bracket because their earnings exceed the Personal Allowance threshold of £12,570.
Looking ahead
In the years ahead, understanding tax planning will be crucial, especially for self-employed individuals seeking to optimise tax reliefs and allowable expenses.
