Millions To Enjoy A Pay Increase As Tax Thresholds Rise

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According to the Treasury, over two million people are set to receive a pay rise thanks to some raises to the national living and minimum wage.

The national living wage is going up from the previous £7.83 to £8.21, adding up to an additional of £690 per year for those who are working full-time. It is estimated to help approximately 1.8 million people.

The national minimum wage will rise up to £7.70 per hour for workers who are aged between 21 and 24, and £6.15 per hour for those who are aged between 18 and 20.

Altogether, the Treasury said that approximately 2.1 million people are set to enjoy a pay increase.

The pay rise comes as tax and pensions changes come into effect today, with over 30 million people set to benefit from a rise to the personal allowance and higher rate threshold.

As the new financial year starts, the tax-free personal allowance has been raised from £11,850 to £12,500, meaning an additional £130 for the typical basic rate taxpayer.

The upper threshold has also been raised to £50,000 – an additional of £495 for the typically higher rate taxpayer.

In addition, the Treasury has declared a freeze on fuel duty for the ninth year in a row and made increments to work allowances for the much-maligned universal credit scheme that are designed to help families with the cost of living.

The financial secretary to the treasury, Mel Stride, said that the changes came after a spring budget that was designed “for the strivers and the workers who keep the country going.”

However, not everyone will experience a heftier bank account from this month, with minimum contributions to workplace pensions heading up to 8 percent.

Employees will have to make up 5 percent, which was previously the total minimum contribution, with employers contributing the rest.

Hargreaves Lansdown calculates that the increase could mean that an average worker sees an additional £30 leave their April pay packet in order to cover the cost of pension contributions.

However, the income squeeze could make the around 10 million people automatically enrolled into workplace pensions better off in the long run, with an additional £55,000 potentially sitting in a pension pot of a 22-year-old by the time they retire.