Monday, November 29, 2021
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Young people face 50% tax rate on earnings over £23,000

tax rate

This is due to changes in the way graduates will be asked to pay back student loans, and the rates at which wage earners will have to pay income tax and national insurance from April next year

Students and graduates have slammed a predicted tax increase on young people as a slap in the face.

In changes due to be announced October 27 by Chancellor Rishi Sunak, it is expected that students and graduates will be forced to pay a 50% tax rate on earnings over £23,000.

This is due to changes in the way graduates will be asked to pay back student loans, and the rates at which wage earners will have to pay income tax and national insurance from April next year.

In March this year, Mr Sunak announced that the income tax personal allowance threshold, the threshold for earnings below which one doesn’t have to pay any tax, would be frozen at £12,570 until 2026, instead of rising in line with inflation.

This effectively means the threshold decreases in real terms.

Any earnings between £12,570 and £37,700 are currently taxed at 20%.

Additionally, in September this year Prime Minister Boris Johnson announced that from April, the national insurance rate of 12% paid on earnings over £9,568 would be increased to 13.5% to raise additional funds for a health and social care levy designed to help the NHS and social care sector rebound after the pandemic.

Employer contributions to National Insurance are also expected to increase by 1.25%.

These measures are expected to be joined by one directly affecting students and graduates.

The Chancellor is predicted to announce plans to lower the student loan repayment threshold from £27,295 to £23,000.

Currently, students pay back 9% of earnings over £27,295 for a period of thirty years, although under the new plans, they will be expected to pay 9% of earnings over £23,000 for a period of forty years.

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