HMRC Tax/National Insurance

Financial Chat
1

If there’s already a tax/National Insurance/HMRC thread then I’ll eternally be in the @Revels grave…

Does anyone have much in the way of knowledge on how National Insurance works or is calculated. I was browsing the HMRC app (as one does on a Tuesday) and found that they estimate I’ll pay £2,000 more tax next year.

No worries. I used the calculator:

And my tax estimated with my annual salary in is roughly right, but my National Insurance they have estimated is a good £800 less than what I’ve paid this year.

Not much information online really. I haven’t changed jobs and I don’t think the National Insurance changes will have amounted to that much (or maybe they do).

I can’t really find much on how to check if this figure is correct. HMRC seem to suggest the only way for it to be incorrect are if you’re self employed or you have had more than one job…

2

I haven’t time to look it up, but NI is being reduced in the coming tax year.

I’m not sure if it’s the rate or threshold or both which is changing.

3

may be better to use something like this The Salary Calculator - Take-Home tax calculator as it will allow you to add pension contributions etc

£800 less on nat ins sounds about right with recent cuts depending on salary

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4

I actually have no clue as I never saw it as particularly large cuts, but the calculator is just “a salary” for the current rates so I suppose it would include the reduced NI amount (but only the first one, right?). Seems a lot for a 2% cut.

5

Keep in mind the Ee’s NI rate also dropped from 12% to 10% in January, in addition to the forthcoming 10% to 8% change.

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6

You have to remember there has already been a national insurance cut this financial year which i think came in February and there is a further cut from April

7

Used that and they state that my NI should be similarly around £700 less than what I’ve paid so far in 2023/24.

I know there was a 2% cut in NI but that shouldn’t mean I’ve somehow “overpaid” this much in NI 2023/24 (unless all these calculators are wrong).

I’m sure it’s all correct I just am quite confused. My tax estimates are all largely right.

8

yes but you wouldnt have got much of a reduction in the current financial year as it didn’t come into play until jan/feb so the next financial year will include the new reduction and a full year of the first reduction. So saving £800 from one financial year to the next seems about right

9

Hmm I (think) I understand you, though the second salary calculator I assumed included the reduction from January but given it’s the same I’m now assuming not.

I’m clued up on almost everything except taxes and pensions, I’ve never understood them.

For example I don’t see £800 as being 4% reduction in my NI, it still seems way too high to me, but I trust smarter folk…

10

If you’re comparing like with like, assuming same salary etc.

Tax Year 23/24:

  • Average rate of 11.5% (ie Jan-Mar at 10%)
  • Max NI payable up to primary threshold of £4,335

Tax Year 24/25:

  • Rate of 8%
  • Max NI payable up to primary threshold of £3,015

Difference of £1,320 if you earn c. £50k. Saving will be less if salary is below £50k.

Very quick calcs on my lunch so may be wrong!

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11

as you know financial year runs April 2023 to April 2024 however from April 2023 up until December 2023 you didn’t benefit from any cuts. From January 2024 until April 2024 you benefit from the first cut. And then April 2024 to April 2025 you will benefit from the second cut as well as the first.

So April 2023 to April 2024 only benefit 4 months of the year (first nat ins reduction), April 2024 to April 2025 benefitting the full year of 2 national insurance reductions

12

I mean hey I’ll happily take the extra. I just didn’t realise it would be quite that much!

Tax chat out. Solved.

13

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14

Looking at the calculators I save about £800 too but I decided not to take the increase on my net pay and just used it as an opportunity to increase my pension contributions so my net pay would end up about where I was already budgeted and my pension contributions increase 5% a month

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15

To be honest given the threads we have and that this is financial focused board I’m surprised there isn’t.

16

Happy new tax year everyone.

I submitted my self assessment today to just get it over a done with, gonna get a nice overpayment refund which is always a treat.

I always seem to either overpay or underpay tax and can never work out why, last year I had a significant underpayment, this year significant overpayment by about the same amount I underpaid last year.

I’ve tried the whole update your PAYE expected income thing multiple times in the year but I think the system is just fundamentally broken when it comes to things like lumpy irregular/variable income like bonuses and stock vests

17

It doesn’t work that well even with fairly steady income. For the last number of years, I’ve done the tax return and it pops up saying I’ve overpaid and it pays out that money. Then a few weeks later I get a letter saying I’ve underpaid in the current tax year and owe them money. And yet, I just know that when I do the tax return (with virtually unchanged figures), they’ll say I’ve overpaid :person_shrugging: