Millions of workers will be hundreds of pounds better off due to National Insurance (NI) changes that kicked in from today.
The changes will affect 30million workers and mean they get to keep an extra £6billion of their wages.
This is because the Government is changing how much you can earn before paying NI.
The idea of the NI cut is to help Brits with the cost of living crisis.
The changes mean some two million low-income workers will pay no NI at all - while millions more will see their tax bill reduced.
But higher earners will end up paying more, and the changes might also affect your State Pension and Universal Credit claims.
This is our guide to what's happening and what it means for your wallet.
What is National Insurance?
NI is a tax on earnings, paid by both employed and self-employed workers.
This cash goes into a pot of money used to fund state benefits.
You pay NI if you’re 16 or over and are either an employee earning above £190 a week, or self-employed and making a profit of £6,725 or more a year.
Once you reach State Pension age, you no longer need to keep paying NI.
How is National Insurance changing?
Chancellor Rishi Sunak is raising the amount you can earn before paying NI from £9,880 a year to £12,750 from July 6.
That means you will only pay 13.25% NI on your earnings that are between £12,570 and £50,270 a year.
The Government says this tax cut will save anyone who earns more than £12,750 around £330 a year - but this varies.
It will also lift 2.2million people on low salaries out of paying NI completely.
How much money will the National Insurance changes save me?
Last month the Government launched a calculator that claims to show how much of your wage you'll keep - or pay - once NI changes kick in.
The calculator uses your salary information to give you an idea how much you'll save if they pay tax through PAYE.
The Government claims the average worker will be £330 better off under the changes.
However, according to its own NI calculator, someone on the average UK salary of £31,447 a year would be just £184 better off - and you'd need to be earning around £15,500 to save £330.
Not only this, but the calculator only compares what you'd save after July 6 compared to just before it.
That means it does not factor in big increases to NI payments from April 2022 that hit all people earning more than £9,880 a year - or £12,750 from July 6.
It all depends on what you earn.
Someone aged 25 working 37.5 hours a week on minimum wage would earn £17,100 a year - and save £318 in NI.
This is because their NI bill would fall from £917.52 currently to £599.40.
A taxpayer earning £18,000 would save an extra £310 a year.
Someone earning £20,000 a year would be £291 a year better off and a taxpayer on £30,000 would save £197.
However, a high earning on a £50,000 salary would save just £10 - and anyone earning £100,000 per year would pay £459 more.
The cut-off point is roughly a salary of £35,000 a year.
Earn less than around that figure and you'll save money. Earning more means you pay more.
This is because the Conservatives raised NI earlier this year - from 12p to 13.25p in every pound you earn above the threshold, for most people.
Tomorrow's changes raise the level at which you'll pay NI, but the earlier changes increase how much of it you'll pay if eligible.
The Treasury has also launched a New Financial Support and Benefits Checker Tool.
This tool aims to help people find Government financial support that they could be eligible for.
The benefits tool asks a person 10 questions and cross-checks against 25 individual benefits and support offers.
How much do I save if I'm on Universal Credit?
Many Universal Credit claimants will end up keeping less than they might think.
That is because of how Universal Credit works.
For every £1 these claimants get after tax, 55p of Universal Credit is taken away under 'tapering' rules.
Someone on Universal Credit due to save £300 from the NI changes would effectively only save £135 once this is factored in.
How will the NI changes hit my State Pension?
People on low incomes risk not paying enough NI to get a full State Pension.
The maximum new State Pension is £185.15 per week, but this varies depending on how much NI you pay in your working life.
You usually need at least 10 full years of NI payments to get any State Pension, and 35 years to get the maximum.
If you are earning less than the threshold to pay NI - so £9,880 a year today and £12,750 from July 6 - you risk not paying enough NI to get the level of State Pension you'd like.
